programmQiagen with a synthetic share buyback program.

Last Updated: 10. Januar 2024By

Sometimes, even after more than 30 years in the stock market, I come across news that I don’t understand. At least not at first glance. Today, I want to tell you about one such news. A kind of further education through your newsletter, so to speak.

What is a synthetic share buyback? It’s about the ad-hoc announcement that Qiagen published earlier this week. It is titled with the sentence: „Qiagen launches synthetic share buyback.“

Oops, I thought while reading, what is this? „Normal“ share buybacks, where a company buys back its own shares through the stock market and then either destroys them or uses them as a currency for acquisitions, were familiar to me. But I have never heard of a „synthetic share buyback“ before. What could this be about?

A look into the internet helped me. In a synthetic share buyback, an immediate capital repayment is combined with a share consolidation. Technically, the synthetic share buyback at Qiagen takes place in three steps:

Three steps
In the first step, the nominal value of Qiagen common shares of 0.01 euros per share is increased by drawing from the „share premium reserve“ from the capital reserves. This enables a capital repayment.

In the second step, several shares are consolidated.

And in the third step, the nominal value per share is reduced to the original level again. The freed up money can be distributed directly to the shareholders – similar to a dividend.

„Dividend“ of 1.20 euros per share
In 2017, Qiagen already used the synthetic share buyback for a payout. At that time, 27 shares were consolidated into 26 new shares. If this ratio were to be maintained in the upcoming transaction, it would correspond to a payout of around 1.30 US dollars or 1.20 euros per share for nearly 231 million outstanding Qiagen shares.

Based on the current share price of 45.30 US dollars, this corresponds to a payout yield of 2.9 percent.

More common in Netherlands than elsewhere
For the Dutch company, this approach is more efficient and faster to implement than a normal share buyback, which can take months. According to capital market experts, it is also more tax-efficient than a dividend payout, as the investor does not have to pay capital gains tax.

Therefore, this ownership method has also been used in the past by other Dutch companies such as Philips or Ahold Delhaize.

Share moderately valued
Currently, the Qiagen share is not excessively high valued. The price-earnings ratio based on the 2024 earnings estimates is currently at 21.9. For a profitable and growing company like Qiagen, this corresponds to a moderate valuation. However, if the share were to come down in the coming months, this could present an opportunity to enter.