Vodafone Board feels that their shares are undervalued at present, so to build the share price up again, they’ve just sanctioned the self-purchase of up to £1 Billion of their own shares.
The publication of this decision comes the day after a Vodafone’s shared dropped almost 14% over the day, the largest single-day drop in its history.
Vodafone had announced that they were concerned about future earnings, highlighting expected reduced revenues from Spain and the UK.
Today’s actions have lifted the price back to the 132p level at the time of writing this.
How share buybacks work
Share buybacks are a well known technique by traded companies, the theory being that by buying their own shares, the number of shares in circulation are reduced, thus making the shares that are still available in the market worth more.
Given Vodafone have a market cap of £70Bn, the buy back of £1Bn worth is pretty significant.
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