Yeah, it would be disappointing if we don't hear something this week about their plans.
In theory they were working on this in parallel to the MW fiasco to ensure they had a Plan B if the deal didn't work out.
Well, we are waiting...
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It's a short week with Matariki. Management and co is unlikely to get back to us this week. We will most likely need to wait until next week.
At these prices, I think Sky will do a share buyback and dividend. 13-15c per share possibly.
https://www.nbr.co.nz/investment/nzm...ack-programme/
Article makes reference to Sky in terms of capital return.
I don't think a buyback is he way to go as Sky will face the same liquidity issues that NZM has had. Plus Sky have an option that NZM didn't have - a tax free cash distribution to shareholders from the campus sale proceeds.
As I have said in the past, distributing the $55M tax free to shareholders is the most efficient way to retur capital to shareholders. Rather than an on-market buyback where they will purchase shares in dribs and drabs over a long period of time. It will be painful to watch.
Better to get IRD sign off to return the funds to shareholders an they can invest it how they like. Or spend it on frivilous bs! Up to the individual.
You back that up with a sizeable dividend. $45m (~25cps). From next year on they can probably sustain 10-15cps divvys.
But this way they can return $100M of shareholder money very efficiently. It should also restore a lot of shareholder goodwill towards management and the board..particularly important if Bowman and Joan Withers are hoping to be re-elected this year.
And this approach still leaves Sophie with ~$50M in the bank. Plenty of additional $$$ on top of CAPEX that has already been budgeted for to do projects that will grow the core, support the share price and prepare Sky for an eventual NZME merger (assuming Sky is not taken out before then by PE or someone else).
I disagree. I think there is good reason to purchase on market at this level, especially with negative overall market conditions. Essentially provides a floor and will help fend off opportunistic bids. They can purchase 5% over the coming year, so say allocate $25m to the buyback. Another $30m capital return. Then of course a healthy dividend.
Ultimately, I think you have to think "what is best for the shareholder?" in these situations.
If Sky did not have the option of a tax free capial return, I would agree with you. The SP is low, so an on market buyback would be favourable.
But Sky do have the option to return the entre $55M back to shareholders tax free. They can cancel some shares in the process if they want to as part of the transaction. Sareholders can then decide whether they want to use the money to increase their ownership of Sky or not.
I mean, how would a buyback (that will take ages to do) be more beneficial to shareholders than sticking the cash in their hands tax free?
I don't completely understand the tax free part. Is the tax that doesn't have to be paid a tax saving for Sky or shareholders? I don't believe I have to pay tax on the sale of my Sky shares...
One of the big benefits of a buyback is that there is no tax on it (like you get when you receive a dividend). So if a company has excess cash AND the SP is at an attractive place (i.e. low) then a buyback is the most tax efficient way of distributing the cash.
However, in Sky's case...because $55M of the cash in the bank came from the sale of an asset...they can apply to IRD to return those funds to shareholders without them being subject to tax (because the payment has come from property sale, not operating earnings and therefore does not constitute a dividend).
The main argument for the buyback is tax efficiency...but if you can have the cash distributed to you tax free instead why would anyone not want that? You get the entire cash return right away and can do what you wish with it.
If the Sky SP is still low in your view you can use all or some of the cash you received to buy more (and increase your ownership % lie would happen if Sky were doing a buyback and you just held).
Unless there is some reason I am unaware of that makes the tax free payment not an option in this case, I think it should be the preferred option.
I'm not a tax expert but I don't think there is any tax Sky has to pay even if the funds from the property were kept by Sky...
I still don't see the tax benefit ><.
Mum and pop shareholders don't have to pay tax on the sale of Sky TV shares though or on a dividend, so there doesn't appear to be a tax saving advantage in favour of a cash distribution. From a tax point of view, the tax savings are the same?
Aye, so if they did a buyback over 12 months (like NZM) then if that results in an increase in SP (a big maybe given the wider market turmoil...NZM SP has actually dropped significantly since they started doing their buyback...) then you could sell your shares at the higher price and not pay tax provided you have held them for longer than brightline.
But that would take ages to realise that gain, and there is a risk that the SP could continue to drop despite your $55M funds being used to cannibalise the stock.
I am saying that they have an option to skip all that and pay the $55M to shareholders without it being taxed (like it would if it was a regular dividend). And this should be the option they are looking at as it is a very efficient way of distributing the cash to shareholders and is risk free to the shareholder...
We absolutely pay tax on dividends.
My bad, I can see the error in my understanding lol.
https://www.nzherald.co.nz/business/...UVGIUEA256OVU/
These guys have been trying to buyback as much stock as they can since they were able to start buying on April 4.
The buyback ends on 16 December 2022 (6 months away).
Volumes are so low that in almost 3 months they could only buy back $5M worth. At this rate, even though the NZM is low...because the volume just isn't there, they would be lucky to buy back another $10M worth over the remaining 6 months.
So under current progress they cannot feasibly return the entire $30M via buyback. Not even half of that (hence the special dividend, which I think is a good move).
Sky TV is in the same boat...only the problem will be even bigger because they will be trying to distribute almost double what NZM are doing ($55M). No way can Sky buyback a meaningful amount of shares in a reasonable amount of time.
The best/easiest/most efficient way to distribute that kind of cash to shareholders is clearly the tax free payment option.