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The recent article from Michael Seigne - Founder of Candor Partners Limited - underscores the significant role NEDs could play to enhance the UK’s attractiveness as a listing venue and in upholding robust governance, particularly concerning derivative-like execution products used, and total costs of executing share buybacks.
Buyback usage in the UK has increased by 170% in 10 years, but the total execution costs are estimated to be around 7% compared to 3% in the US. UK companies are spending £57bn a year on share buybacks and losing ~£2.3bn in excess frictional costs.
These elevated frictional costs can erode shareholder value and potentially hinder these companies' use of buybacks as a mechanism to help narrow share price to valuation discounts of UK listed firms to their global peers.
By actively requesting for measurements of the efficiency of this capital return mechanism, NEDs can both help to improve long term total returns and bolster the competitiveness of the UK capital markets, vital to the health of the UK’s financial ecosystem.
Seigne calls for an independent and constructive challenge to help ensure that the factors which drive these costs are understood, modelled, measured and managed. His open letter calls for smart, targeted reforms to reduce these unnecessary costs and strengthen the competitiveness of the UK’s capital markets.
Learn More:
Read the full article here.
Support Smarter UK Share Buyback Execution Reform:
The FCA is concluding its review of UK share buyback executions. If you believe it's time to explore how to reduce execution costs, improve transparency, and protect shareholder value, you can register your support here. This is not a petition, just a visible signal that this issue matters to the investment and governance community. Your name will not be shown publicly.