Recently, A company I have invested in offered to buy back a certain percentage of my shares. I've been considering this proposal and here's what I think.
Say I bought 10 shares in this company over a period of time such that my average buying price is Rs.100, bringing the total value of my investment to Rs.1000 ( 10 shares * Rs.100, the price of a share)
Today, the market share price has gone way down to say Rs. 50, thus putting the current value of my investment at Rs. 500 (A 50% fall)
If the company is willing to buy back 30% of my shares i.e. 3 shares at Rs.110 each, I'm thinking, it makes sense to sell the 3 shares for Rs.110 each, giving me Rs.330 in cash. With this cash, I can go back to the market and buy more than 3 shares since 330/50 is 6.6.
While the prices in reality aren't exactly as described, it does accurately represent the situation I am in. Am I right in thinking that I should participate in this buyback and then immediately invest it back into the company or are there other factors to consider before participating in a buyback ?
The company in question in a PSU and pays a hefty dividend by Indian standards.