Normal-Course Issuer Bid (NCIB)

What Is a Normal-Course Issuer Bid (NCIB)?

A normal-course issuer bid is a Canadian term for a public company's repurchase of its own stock to cancel it. A company is permitted to repurchase somewhere in the range of 5% and 10% of its shares relying upon how the transaction is led.

The issuer repurchases the shares slowly throughout some stretch of time, like one year. This repurchasing strategy permits the company to buy just when its stock is well priced.

Figuring out the NCIB

Public companies operating in Canada must file a Notice of Intention to Make a NCIB with the stock exchanges they are listed on and receive their endorsement before continuing with a repurchase. There are limits on the number of shares the company can repurchase in a single day.

In one more type of approved issuer bid, a company will repurchase a set number of shares from its shareholders at a predetermined date and price.

In the event that a company repurchases its outstanding shares as such, it is all called a going private transaction.

Ways a NCIB Can Be Used

When a NCIB is approved, the company can continue with repurchases as it sees fit during the period that has been laid out. The company may or probably won't repurchase the full number of shares it is permitted to buy.

A NCIB is sent off when a company's executives accept its stock is undervalued in the market.

Likewise with any stock repurchase program, a company embraces a NCIB on the grounds that its executives accept that the company's publicly traded stock shares are undervalued. By reclaiming shares, they are decreasing the numbers accessible on the market. Their own buying activity decreases supply and raises demand, leading the price higher.

When the value of shares ascends to the ideal level, the company could sell off part of its stake to raise cash, increase liquidity, and broaden its base of investors.

Through a normal-course issuer bid, a company can exploit what it sees as a discount on the stock's current price.

Recovering Control

A NCIB can likewise be a strategy intended to avert a hostile takeover endeavor. In such cases, the company is decreasing the volume of its shares that are accessible on the market and recovering more control over its own stock.

Assuming that the repurchase is big sufficient it can change the concentration and cosmetics of stock ownership. The company might wind up with a controlling interest that can't be tested by an outsider. When this occurs, the company can keep up with its control by essentially delivering too scarcely any new shares to permit any single buyer to aggregate an adequate number of shares to influence shareholder votes or force its plan on the company's board of directors.

Features

• The NCIB must be approved in advance by the exchanges.
• A NCIB is a stock buyback program utilized by companies listed in Canada.
• The NCIB is utilized to raise cash, force the share price higher, avoid a takeover, or a blend of these.