Normal-Course Issuer Bid (NCIB)

A Normal-Course Issuer Bid (NCIB) is a type of self-tender offer in which a company repurchases its own shares on the open market. The offer is made at a premium to the current market price, and the company may purchase up to 10% of its outstanding shares.

NCIBs are typically used to increase the company's earnings per share (EPS) and return on equity (ROE). By reducing the number of shares outstanding, the company's earnings are spread over a smaller number of shares, which increases EPS. Additionally, the company's ROE is increased because the return on its assets is divided by a smaller number of shares.

NCIBs can also be used to signal to investors that the company's management believes that its stock is undervalued. By purchasing its own shares at a premium, the company is essentially saying that it believes the stock is worth more than the current market price.

There are a few things to keep in mind when considering an NCIB. First, the company must have sufficient cash or other liquid assets to fund the repurchase. Second, the company must be willing to accept the dilution that will occur when the new shares are issued. Third, the company must be aware of the potential tax implications of an NCIB.

Overall, NCIBs can be a valuable tool for companies looking to improve their financial performance. However, it is important to carefully consider all of the factors involved before making a decision.

Here are some additional details about NCIBs:

* The offer price must be at least 10% above the average of the company's share price over the 20 trading days preceding the announcement of the offer.
* The offer must be open for at least 20 business days.
* The company may not purchase more than 10% of its outstanding shares in any 12-month period.
* The company must file a Form 10-K with the Securities and Exchange Commission (SEC) within 45 days of the completion of the offer.

NCIBs are a common way for companies to repurchase their shares. In 2019, companies in the S&P 500 repurchased $260 billion worth of their own shares, of which $100 billion was through NCIBs.