Share buybacks just got easier: New rules announced by the Financial Regulatory Authority on Thursday are making it easier for EGX-listed companies to perform share buybacks on the open market.

SOUND SMART- Companies sometimes buy back their own shares from investors, often in a bid to boost their share prices. Shares bought in a buyback then become treasury shares. Can can also sell treasury shares back to the market to raise capital. The amendments aim to make it easier for companies to buy and sell treasury shares when they want to prop-up share prices, encourage trading in their shares, or access cash.

KEY CHANGES-

#1- Removing the requirement to notify the FRA three days in advance before executing any treasury share transaction. The FRA had suspended the rule in response to the covid-19-induced market panic in 2020, allowing companies to act quickly to buy back stock if they needed to support their share price.

#2- Allowing treasury stock trading on the open market instead of the special operations market (OPR), which will result in faster and easier trading.

#3- Protecting minority shareholders by preventing company insiders such as board members and related parties from offloading shares ahead of a treasury stock sale.

#4- A one-month time limit: Companies need to close out any buyback no later than one month after they let the EGX know they’re in the market for their own shares. Issuers will also need ot buy back no less than 50% of the total volume of shares they aim to buy when they first make the announcement.

Tags: