Why is the JB Hi-Fi share price having such a rough start to the week?

The company scaled back its $250 million off-market buyback.

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Key points

  • The JB Hi-Fi share price is in the red on Monday, trading 1% lower at $51.15 
  • The dip comes as the company announces its scaling back its off-market buyback following strong demand
  • JB Hi-Fi will be paying $45.05 per share offered as part of the buyback – representing a 14% discount to the market price set after Friday's close

The JB Hi-Fi Limited (ASX: JBH) share price is slumping amid the completion of the company’s off-market buyback.

Following strong demand, the buyback ­– worth $250 million – will be scaled back to only include shares tendered at a discount of at least 14%.

At the time of writing, the JB Hi-Fi share price is $51.15, 1.06% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.15% while the electronics retailer’s sector – the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) – has slipped 0.67%.

Let’s take a closer look at the non-price sensitive news released by JB Hi-Fi on Monday.

JB Hi-Fi completes off-market buyback

The JB Hi-Fi share price is in the red this morning. Its fall comes after the company announced the scaling back of its off-market buyback following strong demand.

The electronics retailer will repurchase 5.5 million of its shares back from investors – representing 4.8% of its issued shares.

The market price for the buyback was set at around $52.38 at Friday’s close. That means – at a 14% discount – JB Hi-Fi will pay $45.05 for each share bought through the offer.

All successful tenders will be scaled back. Involved shareholders will see 100 shares bought back through a priority allocation before an 88.5% scale back is applied.

As a result, successful shareholders will have 11.5% of the shares they tendered – beyond their priority allocation – bought back.

Though, shareholders who tendered their entire holding at a 14% discount and who would be left with 40 shares or fewer will have all their shares bought back.

JB Hi-Fi also stated the Australian Tax Office is expected to allow $41.87 of the buyback price to be treated as a fully-franked dividend.

The sale consideration of each share would, therefore, be $7.20 for capital gains tax purposes. That meets the shares’ tax market value of $49.07.

Cash from the sale of involved investors’ stock is expected to be sent out to shareholders on 20 April.

JB Hi-Fi share price snapshot

So far, 2022 has been good for the JB Hi-Fi share price.

It has gained 4.8% since the start of the year. Though, it’s fallen 1.9% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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