Normal-Course Issuer Bid (NCIB) Definition

As with any stock repurchase program, a company undertakes an NCIB because its executives rely upon that the company’s publicly traded stock shares are undervalued. By taking back shares, they are reducing the hundreds available on the market. Their own buying activity reduces supply and raises demand, leading the price higher.

At one time the value of shares rises to the desired level, the company might sell off part of its stake in order to raise gelt, increase liquidity, and widen its base of investors.

Through a normal-course issuer bid, a company can take advantage of what it aids as a discount on the stock’s current price.

An NCIB can also be a tactic designed to ward off a hostile takeover assault. In such cases, the company is reducing the volume of its shares that are available on the market and regaining more control all about its own stock.

If the repurchase is big enough it can change the concentration and makeup of stock ownership. The company may end up with a controlling interest that cannot be contested by a third party. Once this happens, the company can maintain its control by simply releasing too few new shares to allow any put buyer to accumulate enough shares to affect shareholder votes or force its agenda on the company’s board of directors.