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What is a share repurchase

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Question - The authorized capital of Sontung Plc., a listed company specialized in producing children's toys, is 1 billion shares.

In 2019, the company's first year of operation, Manta issued 450 million shares at £6.20 per share and 500 million shares at £7.35 per share. The par value of those issued shares is £1 per share.

In 2020, the company paid a total of £50 million to repurchase 10 million shares. In this year, Sontung made a net profit of £120 million, of which it paid out 40% to shareholders.

In 2021, the company issued 10 million more shares at £10 per share. Manta made a loss of £20 million this year and did not pay any dividend.

a. By the end of 2021, how many more shares can Manta issue without approval from shareholders?

b. By the end of 2021, how many shares are outstanding at Manta?

c. Prepare the equity account for Manta at the end of 2019, 2020 and 2021.

d. What is a share repurchase and why would companies want to repurchase their shares?

Reference no: EM132945170

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