Premier Inn owner Whitbread plc (LON:WTB) has completed the return of £2.5bn to shareholders following the sale of Costa Coffee to The Coca-Cola Company at the beginning of the year.
The FTSE 100 group had always said it would return a chunk of the profits from the £3.9bn Costa disposal to its investors.
READ: Whitbread sales drop after Costa disposal
Whitbread returned the money via a share buyback scheme, which saw it repurchase tens of millions of shares at a price of 4,972p each.
The buyback has slashed the number of shares in circulation by more than a fifth, which, in theory, should help to boost earnings per share going forward.
As share prices work to some degree on supply and demand, buybacks can also serve to lift stock prices.
Shorts circling
Reports over the weekend suggested some hedge funds aren’t convinced that will happen in Whitbread’s case, though.
The Sunday Telegraph reported that Jane Street Global Trading – a New York-based high frequency trading firm – is one of a number of funds short-selling Whitbread.
In total, some 17.6% of the company’s shares are estimated to be on loan to those betting against it.
Shorts make their money by borrowing shares, selling them and then buying them back at a specified point in the future. They will turn a profit if they buy the stock back for a lower price than what it was first sold for.
At the end of last week, one of Whitbread’s biggest shareholders, activist investor Elliott Capital Advisers, cut its stake to below 5%, while analysts at RBC Capital and Shore Capital both warned that shares will struggle to get anywhere near the price Whitbread paid as part of the recent buyback.
Whitbread shares were down 2.6% to 4,773p in early deals on Monday.