The shares themselves or portfolio are those belonging to the enterprise because they have not circulated or because the company’s repurchased.
They are the actions restricted to the individual or institutional investor, and that are in the hands of the company. These types of shares are not taken into account for the calculation of dividends or earnings per share (BPA ).
In addition to a company making a share buyback, it is very well seen by the market. Because logic tells us that if a company does this operation, it is because it thinks the price is undervalued. Understanding that no one will know a company better than the company itself. And that in this sense, he wants to make a profit with the subsequent sale of those same shares at a higher price. This is why these operations are positive for the potential investor.
Main characteristics of portfolio shares
As mentioned above, these actions are not taken into account for dividends or for the calculation of profit per share. In addition, another important feature is that they do not have the right to vote.
On the other hand, share repurchase programs usually have a legal limitation. And they can not exceed a maximum percentage of the capitalization of the company. This limit will be established by the regulatory body of the company’s natural country.
The effect of own shares on the financial balance
When a company issues new shares, the value of its net worth increases thanks to the financing granted by the shareholders. Given the capital increase that has been created. So in the case of repurchase of shares or shares in the portfolio , the effect is the opposite. That is, the repurchase of shares, reduces the net worth of the company and therefore the financial balance.