Normal-Course Issuer Bid (NCIB)
Candlefocus EditorNCIBs provide companies with the ability to repurchase their shares in the open market over an extended period of time. This allows the company to efficiently purchase shares at a cost and in quantities which may not be possible in block trades. NCIBs are popular with companies of all sizes and across a range of industries as they provide an efficient and flexible way for a company to return capital to shareholders.
NCIBs provide an opportunity for companies to manage or potentially increase their stock price by eliminating or reducing excessive discount to fair value. By actively buying back shares, companies can increase demand for their stock in the markets, thus increasing the price at which other investors will purchase their stock. NCIBs also provide a way for companies to demonstrate their commitment to the long-term growth of the company and the share price.
NCIBs also provide a way for companies to defend against takeover attempts. By repurchasing stock, companies can reduce the number of shares available and make it more difficult for opportunistic acquirers to purchase shares in order to take them over.
Before a company can implement an NCIB, it must obtain the approval of its board of directors, following which an application must be submitted to the relevant stock exchange. An NCIB can last anywhere from a few months up to a maximum of one year, and in some cases may be renewed or extended at the discretion of the company’s board of directors.
NCIB programs provide companies with a flexible and convenient way to return capital to shareholders and manage their stock price. Through reducing the amount of outstanding shares, companies can increase the value of their stock and defend against potential takeover attempts. If you're considering whether or not to utilize an NCIB program for your company, be sure to consult with a qualified financial or legal advisor in order to fully understand the implications of this decision.