Regions Financial Corporation (NYSE:RF) is all set to repurchase preferred stock
Regions Financial Corporation (NYSE:RF)’s indirect subsidiary, the United Plants Preferred Funding Corp, had announced that it will be repurchasing all the preference shares that have been offered by the company under the 7.75% of Non-Cumulative Exchangeable Series-B Preferred stock category. In tandem with this repurchase offer, RF had begun a consent solicitation via which beneficiaries of the Series B Preferred Stock would have to submit their consent for this repurchase offer. In addition to this, a cash tender or auction offer had also been started to repurchase the preferred stock.
It had also been informed that the beneficial owners who hold around 61.1% of the outstanding United Plants shares of the Preferred-Funding Corp Series B Preferred Stock will be tendering in their shares. These shares would be sold at the re-purchase offer and they would be submitting their consent at the solicitation.
Why do companies buy-back shares?
When ever a company announces that it is buying back its stock the news will have to make the headlines. However, several investors are not sure about what the rationale for a move such as this, is. The one reason why a company would buy back its own shares is because it has extra cash on hand and that it doesn’t really have very many lucrative investment opportunities before it. The other reasons could be that the company is boosting share prices, preparing to fight-off a hostile takeover, massaging financial ratios or even mitigating any potential dilution in earnings that result from employees exercising their stock options.
Extra Cash on Hand
Companies opt for the most beneficial use for their investment. If a company rakes in cash faster than the management can spend it on research or new investment, they might end up with an excess of cash. At this juncture, the two main choices that a company has are to buy back stock or dole out some of the profits in the form of dividends. As far as shareholders are concerned, both these options add to their pockets and that’s what Regions Financial Corporation (NYSE:RF)’s shareholders will be doing.