Our thoughts on the CBA buyback
Your thoughts please on the proposed buyback of CBA shares? It's pros and cons for shareholders?
Many thanks
Gregory
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Answer
Hi Gregory,
Buybacks are often good news for investors short-term because they reduce the number of shares on issue and by definition support or even push share prices higher. Medium to longer term whether this is the best use of excess cash can be questionable. NAB for instance, issued equity near the lows and are now buying it back at significantly higher levels, the fact CBA did not need to issue shares at the lows will be just another supporting factor for their dominance over the sector in years to come. We like CBA targeting ~$110 and covered their off market buy-back in a questions recently – answer can be found here.
