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A Hypothetical on CBA Buy-back

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A Hypothetical on CBA Buy-back

Hi James, Has there been a cut out date for the buyback of CBA shares. My thoughts were to buy 3000 to 4000 shares on Monday, enter the buy back, then to sell them back to the CBA picking up when I do my tax for the superfund in pension stage at financial years end ,the franking credit bringing overall $14.00 per share profit. I have read your anticipated outcome , your thoughts please. I understand that any advice or thoughts you give are of a general nature etc etc. Denis

Answer

Hi Denis,

I’m writing this on Friday (20th August) and the record date for the buy-back was 17th August, the day they traded ex-dividend. The practical issue with the above is that it is highly unlikely that all shares will be bought back under the buy back facility, only a small portion may be bought back. There is also the market risk to take on and a few other factors. In my view experience, the practical outcome is not as straight forward / low risk as the theory.

In terms of CBA itself, it  is following our anticipated path mapped out over recent months, having already fallen ~10% from last weeks high albeit after trading ex-dividend $2 fully franked earlier in the week. We would keep it simple and accumulate in the $95-$98 area unless the stock deviates from its current course.

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Commonwealth Bank (CBA)
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