Letter to Editor

Your latest issue on special situation investing was richly cultivated and enlightening! I am curious to know more about the different types of buybacks that a company can employ. Can you shed some light on the same?
- Ravi Verma 

Editor Responds: We are glad to hear that you enjoyed reading our cover story on special situation investing and appreciate your query. Companies reward their shareholders either by paying dividends or conducting buybacks. Over the past few years, buybacks have become more sought after. Buybacks are a sign of healthy corporate governance and optimism as the management of the company believes that their shares are undervalued.

Buybacks can either be an open market offer or a tender offer. Under the open market offer, a company buys back shares from the open market over a given period of time whereas under a tender offer, a company makes a bid to the shareholders to purchase a specific quantity of shares at a predetermined price. To encourage shareholder participation, the quoted buyback price is usually more than the current market price. Hope this helps in answering your query. Keep writing to us with your queries.