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What Is a Normal-Course Issuer Bid (NCIB)?
A normal-course issuer bid is a Canadian term for a public company's repurchase of its own stock in order to cancel it. A company is allowed to repurchase between 5% and 10% of its shares depending on how the transaction is conducted.Key Takeaways
- An NCIB is a stock buyback program used by companies listed in Canada.
- The NCIB is used to raise cash, force the share price higher, ward off a takeover, or some combination of all of these.
- The NCIB must be approved in advance by the exchanges.
Understanding the NCIB
Public companies operating in Canada must file a Notice of Intention to Make an NCIB with the stock exchanges they are listed on and receive their approval before proceeding with a repurchase. There are limits on the number of shares the company can repurchase in a single day.In another type of approved issuer bid, a company will repurchase a set number of shares from its shareholders at a predetermined date and price.
If a company repurchases all of its outstanding shares in this manner, it is called a going private transaction.
Ways an NCIB Can Be Used
Once an NCIB is approved, the company can proceed with repurchases as it sees fit during the period that has been established. The company might or might not repurchase the full number of shares it is permitted to buy.An NCIB is launched when a company's executives believe its stock is undervalued in the market.