SAGICOR Financial has received approval from the Toronto Stock Exchange to enhance its share buyback programme, the regional insurance company said last Friday, after the close of trading.
On June 16, 2020, Sagicor announced that it was buying back 3,000,000 of its common shares, representing 2.01 per cent of the financial services company’s 149,161,886 issued and outstanding common shares as of June 16, 2020.
Last Friday, Sagicor said it was increasing the number of shares in its buyback programme to 8,000,000 common shares. That number of shares amounts to 8.46 per cent of Sagicor’s public float as of June 16, 2020.
In the period between June 22 and August 28, 2020, Sagicor purchased and cancelled a total of 2,390,400 Common Shares under its initial share buyback, representing 1.60 per cent of the issued and outstanding common shares as at June 16, 2020. The 2,390,400 shares that Sagicor repurchased also represented 2.53 per cent of the group’s public float as at June 16, 2020.
In Friday’s statement, Sagicor said the improved share buyback will be effective today (September 9, 2020) and will continue until June 21, 2021 or on an earlier date, if Sagicor acquires the maximum number of common shares permitted.
Sagicor also indicated that no other terms of the share buyback programme have been amended and the company’s automatic share purchase plan, for shares bought during blackout periods, remained in place.
At a virtual news conference on June 24, Sagicor’s chief financial officer Andre Mousseau said the company had allocated between US$12 million and US$15 million to buy back 3,000,000 of its shares between June 22, 2020 and June 21, 2021.
At the prevailing exchange rate, US$12 million to US$15 million would have worked out to be between CAD$16.32 million and CAD$20.4 million.
Asked whether the amount of money allocated for the share buyback meant that Sagicor was looking to acquire the 3,000,000 shares at between CAD$5.44 and CAD$6.50 per share, Mousseau said: “I would say that arithmetically that sounds about right, but we are not putting forward public guidance of the price at which we are repurchasing the shares.
“We have to repurchase the shares on any given day at the market clearing price. We cannot lead the price. We can only provide a bid in the market at the level of the market.”
The share buyback programme, formally called a Normal Course Issuer Bid (NCIB), is regulated by the Ontario Securities Commission and the TSX.
The number of shares that Sagicor repurchased under the initial share buyback programme was linked to the average daily shares traded for the previous six months.
In the six-month period ending June 9, 2020, the average daily trading volume on the TSX for the 26-week period was 4,978 common shares.
Mousseau said the average daily trading volume for the two weeks before the initial buyback had been 50,000 shares a day, “about ten times what it had been in the early months”.
“From July 1, the number of shares that can be purchased may not exceed 1,244 common shares, other than block purchase exceptions,” Sagicor said in the statement last week.
Sagicor listed on the Toronto Stock Exchange on December 5, 2019, started trading at CAD9.14 and briefly peaked at CAD$10 before plunging to a low of CAD$4.88 on June 17, 2020.
Mousseau said Canadian regulations allow companies to expand their share buyback programmes, “but this was the amount of capital that management felt would be prudent to allocate to this strategy, at least at first.
“There is no constraint with respect to our ability to choose and go and do more if we were to very quickly acquire the 3,000,000 shares and felt that it would be a good thing to do more,” Mousseau said.
For Sagicor to increase the number of shares that it proposes to buy back from the market “we would simply have to file another application with the regulators,” he said.
Also speaking at the news conference was Sagicor’s chief operating officer Ravi Rambarran who said the fundamental purpose of the Caribbean company raising new capital was to fund its growth options.
Rambarran said: “We have always said that Sagicor has many opportunities for growth. So it is a balancing act between retaining growth capital and providing capital to buy back shares.
“The other motivation for the share buyback programme was that we realised we had many small shareholders in the Caribbean, who during Covid-19 may be liquidity constrained. So this share buyback is really a mechanism to provide a measure of liquidity to our small shareholders, to the extent they wish to do so.
“But the primary reason for capital raising is for growth and it remains so.”
Questioned about Sagicor’s year-to-date decline of 44 per cent on the TSX and the promises made by the group about enhanced liquidity and price discovery with the move to the TSX, Rambarran said the group is disappointed with the company’s share price performance.
But he pointed out that the company had been listed on the T&T and Barbados stock markets between 2002 and December 2019.
“For 17 years, we never had the liquidity, or the price discovery, whether the company performed well or not, when listed on the two Caribbean stock exchanges. It is very early days on the Toronto Stock Exchange because we have had a material intervening event of Covid-19,” said Rambarran.