Special Dividend - Definitely Points up in HBKS's Case
Tells you a few things:
#1) No plans to expand banking operations at all.
#2) No plans to pay back SBLF.
#3) Assets must be solid - no plans to add to ALLL.
#4) So what's the plan? You take that cash off the books, it makes it a lot easier for someone to make a bid for the whole bank.
But you ask: Why not buy back stock instead? Could be a few reasons -
• Reduce the float too much, and market makers might drop HBKS completely once it deregisters - that wouldn't be good for a lot of reasons.
• Management might realize you can't buy up the stock with company funds and then launch an insider buyout - or they've taken insider buyout off the table. (Either way, it's good for outsiders, because insider buyouts are usually low-ball bids.)
• Buyback program wasn't working anyway. You could see the bank put up a bid and no one was selling shares to them. As in, "What idiot is going to sell their HBKS shares now?" Bank may have just realized, stock is just too illiquid to buy up many shares.
• Reducing the share count might not increase the ultimate buyout price anyway .... look at someone like TowneBank - they keep adding more outstanding shares and the market doesn't seem to notice.
Some people probably wonder ... why would the bank reduce the buyback?
The bank probably just realized there's not really any HBKS stock left for sale. You see ... wealthy shareholders just gave their grand kids $5,120,000 cash for tax planning purposes (if you're wealthy, you'll know why). The grand kids launched their own HBKS buy up program last month ... so the float is gone. Bank just found out what the grand kids already knew.