A Normal Course Issuer Bid is a bid by a company to purchase its own publicly traded shares with the expressed intent of ‘purchasing them for cancellation’. The number of its shares a company may purchase on in the public market is subject to regulatory approval. Shares purchased by a company pursuant to a ‘Normal Course Issuer Bid’ are cancelled. This is anti-dilutive to company shareholders who do not sell into the company’s bid.
Where a company makes a ‘Normal Course Issuer Bid’ it is reasonable to presume it has done this because its Board of Directors (and presumably senior management): believes:
- that the public markets are understating the value of its outstanding shares at the point in time it makes its bid; and,
- that the company has sufficient redundant funds on hand (e.g. funds not required to fund its ongoing operations) to fund its bid.
It follows that companies who make ‘Normal Course Issuer Bids’ are companies that may be worth researching at or shortly after the date at which they make their bid.