Redemption of shares
Just need some confirmation whether my idea sounds correct in formal English:
Can I use the verb 'redeem' (the noun: 'redemption') to refer to the transaction of re-purchasing the shares in a company's capital stock previously sold to a number of shareholders?
Thank you in advance - T.K.
Re: Redemption of shares
Would a few definitions and some context help out?
Originally Posted by Tomasz Klimkiewicz
Stock redemption, a common method of cashing out shareholders, occurs when firms buy the shares. Frequently, this is the most viable option since remaining shareholders lack the personal funds to purchase a large interest in the business--the organization is the entity with the money.
In stock redemption transactions, firms purchase shares from stockholders and shareholders no longer own those shares. Then, the remaining shareholders' interests increase proportionally.
A company can redeem shares which are issued as redeemable shares by repaying the nominal value to the shareholder, whereupon the shares are cancelled. Redemption must normally be from distributable profits, but a procedure exists to allow shares to be redeemed from capital. As this amounts to a reduction of capital, an amount equivalent to the reduction of issued capital may need to be transferred to a capital redemption reserve.
Shares are being traded at a net worth discount of about 70%, the company has decided to begin its redemption of 10% of the outstanding shares in the Company. The purpose of this redemption is to distribute the net worth discount of the redeemed shares among existing shareholders at the same time as several of the Company's key figures, including the profit per share, continue to improve.
All the best, :D
Thank you very much for your time, Casiopea; indeed, the definitions and contexts contain all I wanted to know.
Since the case I am writing about involves purchasing of shares by a company (a corporate entity) from current shareholders (both corporate entities and individuals) I think I can safely and accurately describe the transaction as redemption.
I'd better get round to work.