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BGC Partners, Inc. Message Board

  • dbrs567 dbrs567 Apr 2, 2013 10:19 AM Flag

    Gave up 25% of the company...........

    for 1.23 billion and gained under 300 million in market cap from a stock price that was already severely undervalueing the assets. At $5.46 we are nowhere near where we should be trading. You'd have to be mentally unstable to sell here.

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    • Theoretically, BGC Partners could use the proceeds from the sale of e-Speed to buy back over 80% of the outstanding common stock at $5.50/share. (I say "theoretically" because if BGC Partners attempted such a massive stock buyback, it would drive up the stock price, causing the company to net far fewer shares than 80% of the outstanding shares.) But the ability of BGC Partners to fund a large share buyback illustrates how undervalued the company is. Just think--if BGC Partners bought back just one third of the outstanding shares, reported earnings would increase by 50%, and the company could hike the share dividend yield by 50% while keeping the total cash expended on dividends flat.

      I'd not be surprised if Howard Lutnick returns more cash to shareholders--probably through share buybacks. He stated that his motivation in selling e-Speed is to increase shareholder value and visibility by making it clear that the market has been undervaluing BGCP shares. Clearly, the business value of the firm is far higher than the share valuation indicates. The nosebleed dividend yield pre-announcement suggests the market had been assigning some degree of bankruptcy risk to the firm, but the transaction shows there is no bankruptcy risk, and that the market was simply mispricing the shares.

      Sentiment: Strong Buy

    • I like the way you think.


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