Why Is Underwood Capital Doubling Down on Its 10% Share Buyback?
Underwood Capital Limited has announced an extension of its on-market share buyback program, aiming to repurchase up to 10% of its shares over the next year as its stock trades below net asset value.
- Extension of on-market share buyback for 12 months starting 27 October 2025
- Buyback capped at approximately 10% of ordinary shares (20.5 million shares)
- Shares trading at a discount to net asset value motivates buyback
- Maximum buyback price limited to 105% of five-day VWAP
- Buyback subject to market conditions and may be suspended or terminated
Underwood Capital’s Strategic Buyback Extension
Underwood Capital Limited (ASX, UWC), a specialist investment company focused on medium-term capital growth, has announced an extension of its on-market share buyback program. The initiative, originally commenced in October 2024, will now continue for a further 12 months starting 27 October 2025, allowing the company to repurchase up to 20.5 million ordinary shares, roughly 10% of its total shares on issue.
Rationale Behind the Buyback
The company’s board cites two primary reasons for this move, the persistent discount at which UWC’s shares trade relative to their underlying net asset value, and the company’s robust capital position. By buying back shares at a price below intrinsic value, UWC aims to enhance shareholder value and optimise its capital structure.
This approach reflects a proactive capital management strategy, signalling confidence in the company’s fundamentals and a commitment to returning value to shareholders. The buyback price will not exceed 105% of the volume-weighted average price (VWAP) over the five trading days prior to each purchase, ensuring disciplined pricing aligned with market conditions.
Operational Details and Market Impact
The buyback will be conducted on-market, with purchases made at times deemed beneficial by the company, subject to share availability and prevailing market conditions. Importantly, UWC retains the flexibility to suspend or terminate the buyback at any time, underscoring the contingent nature of the program.
While the maximum number of shares to be repurchased is capped, there is no guarantee the full amount will be acquired. Investors should therefore monitor the buyback’s progress closely, as actual volumes and timing could influence share price dynamics and liquidity.
Looking Ahead
Underwood Capital’s extension of its buyback program reinforces its active stewardship of capital and signals management’s confidence in the company’s valuation. For investors, this move could provide a floor under the share price and potentially improve returns if the buyback successfully narrows the discount to net asset value.
Bottom Line?
Underwood Capital’s extended buyback underscores a strategic push to unlock shareholder value amid persistent share price discounts.
Questions in the middle?
- How aggressively will UWC pursue the buyback amid fluctuating market conditions?
- What impact will the buyback have on UWC’s net asset value per share over the next year?
- Could the company’s capital allocation priorities shift if market conditions change?
