The Money3 Corporation Limited (ASX: MNY) share price has moved on a downhill trend since the start of the year. However, this could change following the company’s recent announcement that it will conduct a buyback of its shares.
At the time of writing, the automotive finance specialist’s shares are up 7.62% to $2.40 apiece.
Money3 shares to turn the tide?
According to its release, Money3 advised it will undertake a buyback of up to $15 million of its ordinary shares.
This will occur over the next 12 months through a series of on-market transactions as part of the company’s capital management strategy.
While Money3 will undoubtedly reduce its surplus capital, shareholder value will increase.
To break it down, when Money3 buys back its shares, the number of shares on its registry will decrease. With a lesser amount, this effectively increases the value of each share as the revenue and profits remain the same.
Traditionally, when this occurs, a company’s share price tends to rise over time.
Money3 noted the decision to buy back shares reflects the strong confidence of the group along with future growth prospects.
Money3 managing director, Scott Baldwin commented:
The company has over 20 years’ experience lending and collecting throughout all credit cycles. In addition, given our strong financial health, together with a low level of leverage, and the lowest cost of capital the group has ever had we believe implementing a buyback is the most appropriate capital management strategy at this time.
Money3 share price snapshot
It’s been a disappointing 12 months for Money3 shares, falling 22% in value.
The company’s share price has drifted even further during the course of 2022, down 32%.
Money3 commands a market capitalisation of about $513.03 million and has approximately 213.76 million shares on its registry.