If you are a long term investor in GME the irony here is that every move down right now benefits you as a shareholder. With GME buying back stock they are getting more bang for the buck.
A 300 million buyback executed in full now takes back a full 10% of the companies entire float. Should the stock drop to 15/share shareholders take some temporary pain but if you are not going to sell as a business owner Mr. Markets price is only there to serve you and nothing more. In this case lower prices serve us shareholders well.
You should hope for lower prices and we can watch GME execute their buyback and perhaps be able to repurchase 15% or more of the entire company float with just 300 mil. This is an excellent use of capital that only gets better with every share repurchased.
As a long term holder I want the stock to go do $10. At that price we get 20% back of the company at a rate of just 3x earnings. Even at 20 the leverage is huge for GME. Buyback will show increase in EPS for all shareholders.
If I were GME management I'd aggressively buy back here under 20 and more aggressive should the stock fall more. I'd plan an additional 300 million buyback for 2011 should the shares not approach fair value of 35+. Then in 2012 after having bought back 20% to 40% of the company float I'd institute a dividend with 5% plus yield. All this is easy for GME to do based on their cash flow and the market placing GME stock out of favor for the moment.
Eventually the market will reflect the value in the shares but in summary right now with a buyback in motion we want shares to fall as much as possible. I'd even take $5/share as the 300 million would buy back almost half the company!
"90% ownership of this stock is by instutions and unfortunately most of them aren't quite that stupid. "
REALLY? You mean the institutions and funds where 99% of them lose to the index over 10 years? The ones that ignored the Chipotle B shares which had same claim on earnings as A shares except 10x MORE voting power? The funds missed this because buying a CMG.B compared to CMG was too difficult for their stupidity. CMG.B shareholders got a free 10% pop when chipotle moved the B shares up into the A's. I watched while dumbass institutions missed this. Just one example of the extreme institutional stupidity.
Here is another. Apple trading at 15x forward earnings. Institutions look at their screeners and never checked cash flow or bothered to take into account new FASB accounting. A week ago they were 30x earnings. Now half that but growing at twice their PE. Apple under valued right NOW by 50% but institutions play games or are stupid. One year or less apple will be over 300 for 50% return. If institutions were smart they would all buy it now but that is not the smart game they play. They will chase it instead at 350.
GME is dirt cheap here and Mr. Market gives small investor opportunity to partake in 700M annual and growing cash flow stream. 2010 will be solid with its release schedule but institutions won't jump on board until this stock is 25 to 30 which is 25% to 50% higher then it is NOW.
Lesson here never underestimate the stupidity of institutions. They ARE that stupid.
Hayden or Carolyn. Sounds like you are confused about whether you are a man or woman. Easy to see why you would be confused as to what the effect of a stock buyback would be. Get some professional help, dude.
"New shareholders would invest in GME because the buyback would make the stock look cheaper."
That is correct IF you are a moron who's understanding of valuation doesn't extend beyone P/E multiples.
90% ownership of this stock is by instutions and unfortunately most of them aren't quite that stupid.
Hayden, agoodkoz is right. New shareholders would invest in GME because the buyback would make the stock look cheaper and it would have a positive affect on stock price with increased demand. That's why management is doing this. It is a good use of excess cash for the shareholders to benefit. So expecting the P\E to rise is the proper evaluation of the move by GME management.
Hayden: This is your problem. You stated, "SHAREHOLDERS WOULD BE WILLING TO PAY LESS FOR GME" after the buyback "because there is $300 million less cash on hand". This is an idiotic statement and everything that I have been trying to address with you, dude. You are a moron because you don't read what others are trying to point out in your failed logic. My point is, a buyback makes the shares look CHEAPER because the P\E is lower now. That prompts value investors to buy it, and the additional demand makes the stock price go up. A dividend of $300 million on the other hand would fall in line to what you are saying, but you won't listen up. Now get off the babysitter.
You are right. If anyone bothers to GOOGLE they will find articles backing up your viewpoint.
On the other hand I am really getting fedup with this. I make it a habit to never sell on Fridays But come Monday I will sell at least 25% of my holdings. I get to add to my captal loss carryover,,,wowie!