Taxpayers picking up as BHP mopping up

BHP Billiton has announced that it wants to buy back its shares. So many people lined up that BHP increased the amount it would spend on the buy back to 2.25 BILLION dollars. So, if you wanted to sell any BHP stock, the company was right there to mop them up.

And this is where it gets kinda confusing. If you wanted to sell your stock, you could get about $28.88 per share (as of the time I'm writing this post, which is up 87 cents from last Friday close). But if you wanted to sell them to BHP, they would only pay $23.45 per share. And institutions lined up to sell them at that price (because the sale was conducted off market, there wasn't any opportunity for mom and pop to sell their own shares at the 14% discount to the market that the smart intos were so keen to get).

Why would anyone in their right mind scramble to sell their BHP stock off market to BHP when they could get 14% more on market? Brokers' fees certainly don't mount up quite that much.

They do it because Australia has this neat little cheat that makes it a clever way for certain shareholders to avoid (legally avoid) taxes by partaking in such a mad scheme. In effect, the taxpayers pick up the net tax difference by way of foregone tax revenue.

You can read more about this nifty slight of hand in a prior post.