ABB has a free float of close to 48% on its outstanding capital. It is here that the churning is going to take place. Promoters increasing stake by 20% will reduce free float to that extent. This will mean that the stocks weight age on the index will get reduced substantially.
Of course institutions will not sell out for less when they already have the offer price quoted. But, lets keep in mind that they have got in at low price. It is the retail market which is going to jump in and out using this news. How far each one benefits depends upon their shrewdness.
The price of 860 which you have paid for this stock and the buy back price of 900 gives a difference on 40 per share. From this if we deduct commissions, the left over is just above 3% of your investment. It is a decent return on Investment for the 3 months period which the money is going to be locked.
But let me tell some thing here, suppose your exposure in this stock has a substantial amount like anything above 50 shares. That much money invested in other different avenues in the present market conditions can get you on an average 3 times of what this stock is going to give (bare minimum).
The way they have announced this buy back scheme is rising suspicion. The price move on the stock shows it clearly, there has been utter chaos in the market yesterday in short covering. It is because of panic to cover shorts that this price escalation has come in. Once all the shorts are covered, smart money will be off from this stock. It is once bitten twice shy, traders have been squeezed out of this stock, caught unawares. Gaining back their confidence will take a lot of time.
Even this clearly shows on the charts, it has taken one month for the bears to get the stock to the price which it was in, prior to the announcement, which the news has covered back in one day. This is crushing of individual confidence.
We do not have any position in this stock, we are giving our opinions unbiased. Once we become a community, other persons loss is ours too. Anyway it depends on individual decision making process and withholding capacity about continuing long position on this stock.
Putting us into this situation, we would find a right opportunity to exit and take a better stock to trade.