British-based oil supermajor BP PLC (NYSE: BP) deposited a check for nearly $12.5 billion yesterday as it closed the sale of its 50% in TNK-BP to Russia’s Rosneft. The company announced this morning that it will repurchase up to $8 billion worth of BP stock “to return to BP shareholders an amount equivalent to the value of the company’s original investment in TNK-BP.”
Isn’t that cute? Closure and all that.
First of all, $8 billion in 2003 is now “equivalent to the value” of nearly $10 billion, just adding inflation alone. Second, BP has about 3.2 billion shares outstanding. At this morning’s price of around $41 a share, the company can repurchase about 195 million shares, or 6% of the outstanding stock. The math says that 6% of $41 is nearly $2.50.
We expect a large shareholder to point out that $8 billion spread over BP’s outstanding shares could pay a one-time dividend of around $2.50 per share right now. There is not much question which choice most shareholders would make, if they could choose. Of course BP does not have to worry about a shareholder revolt — with a market cap of around $130 billion even the largest shareholders have little power to force the company’s board to do anything.
BP’s shares are up about 3% in premarket trading this morning, at $42.06 in a 52-week range of $36.25 to $46.26. Expect a 6% boost today.
ALERT: Today Could Be Your Best Shot At Early Retirement (Sponsored)
If you want to retire before 65, pay attention. Study after study has shown that the longer you stay invested, the better your chances at an early retirement.
Every day that goes by without saving and investing for tomorrow means more to earn and save later. Don’t waste any more time and get started with Robinhood today. The app makes it easy to buy and sell stocks, mutual funds, trade options, and even cryptocurrencies.
Sign up today — click here to start your journey.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.