Stock Buy Back versus Dividend.
During 2010, the cash will likely be pouring into Rambus like Niagara Falls.
$200mm up front cash payment from Samsung (already received)
$400mm expected from the Hynix patent infringement case.
$200mm in new Rambus stock purchased by Samsung (coming in 1st Quarter)
And probably a big check coming in from Nvidia, for at least forward licensing of Rambus patents by Nvidia.
For discussion purposes, let’s just call it a nice round one billion dollars of incremental cash coming in to Rambus this year.
So what does Rambus do with the cash?
Acquisitions of additional high tech companies with licensable technology, obviously.
But if the recent acquisition of the LED Lighting Group, these might be small acquisitions (if I remember correctly this was for $15 million). So it might take the Company a good long while to put the cash to productive use.
Stock buy-back and/or dividends. On the recent 4Q and full year Conference Call, the CFO mentioned that they were indeed looking at a stock buy-back as a possible use for some of the cash.
Considering whether to distribute some of the cash in the form of a dividend or a stock buy-back is a particularly interesting calculation for Rambus. Normally, a stock buy-back would be the automatic choice, since it is more tax-effective than paying corporate taxes on the income at the corporate level, and distributing it as a dividend to the shareholder, which in turn is taxed at 15%, at least for US recipients. In this case, however, Rambus is not a taxpayer, due to their tax-loss carryforwards. So they should be indifferent to a stock buy-back or paying a dividend. And the recipients should be indifferent also, since both dividends and capital gains are taxed at the same rate (except for long-term capital gains, those holding 5 years or longer, in which their rate would be 5%)
But basically, both sides are indifferent.
So we look to other implications to make the decision. Well, there are about 12 million of Rambus shares sold short. If there was a dividend declared of say, $0.50 per share, collectively the shorts would need to pay, out of their pocket, about $6 million (12 million short shares x $0.50) of dividends to those brokers from which they borrowed the stock. On the other hand, a stock buy-back would shrink the total universe of shares outstanding, and thereby put pressure on the short’s ability to continue borrowing the shares (they would be somewhat scarcer). So the shorts don’t really like either choice, but at least the stock buy-cash doesn’t trigger an immediate cash outflow to them.
So which should they pick? Not an easy decision, but I would guess, at the end of the day, they would go with the stock buy-back.
The deciding factor – stock options. Management holds a considerable amount of stock options. The triggering of these options is dependent upon the stock reaching certain thresholds. Since a stock buy back would provide upward momentum to the stock price, their options are more likely to be exercisable. A dividend is of no real benefit to stock option holders.
Getting tired so that you need to refer to posts rather than writing? Waste of my time buppie. Go to sleep. You need it.
By the way NAS up pretty strong and Rambus????????????????????????????
ON ITS WAY DOWN TO 19s NOT THAT FAR TO GO. JUST A COUPLE OF BAD MARKET DAYS MY IMBECILE AND I WILL HAVE BEEN PROVEN CORRECT----$19s WAY BEFORE $30. THEN WHERE IS YORE CREDIBILITY PAL. YOU ARE IN SERIOUS DANGER. ENJOY THE WEEKEND. NEXT WEEK WILL TEST $19. THEN WE ALL WILL BE UNMERCIFUL AND HOUND YOU OFF THE BOARD. WE WILL SEE WHO THE NUT CASE IS.
WURST, YOU WILL SOON BE DEMOTED TO BELOW CRUSTACEANS and be on a par with Cretin Holmes. ENJOY.
Wurst, you are playing with yoreself. Rambus is not gonna do a stock buyback UNLESS the price really tanks and then to try and shore it up, they may intervene to demonstrate confidence in the company, nothing more. Most shareholders including the institutions are outraged. The stuff about institutions buying is old news and was predicated upon PRE-Samdung deal. See what the institutional ownership will be this quarter. The institutions cannot afford to keep holding this dog. There are no catalysts to pop it up. There may be a good market day and the institutions will sell into it and unwind their positions.
Kramer's CMC's have been a nightmare. The man has no control over his courtroom and the Cartel lawyers are playing him like a fiddle while he burns. He is overly concerned about being overturned just like Rip van Whyte. Simple AT case huh? He makes loud judge like noises but he is looking more and more like a guy in over his head. The Cartel lawyers are way above this man. They will twist and turn Kramer around like never before. Now do you understand WHY KRAMER IS SAYING THAT MAYBE THERE WILL BE ANOTHER JUDGE? Kramer is big talk and zero action. He is a big embarrassment to his profession and the public at large. I can well understand why some people have no respect for the supposed guardians of the law. Kramer may be OK as a traffic court judge but here, he is clearly inept. It may be better for Rambus to get a new judge, be done with it and start anew. Now the AT trial will probably be rescheduled till late September and then rescheduled again because of Columbus Day, Election Day, Thanksgiving , Christmas and then New Years. The new Judge will have a year's time to get up to speed but then be inundated by the delay tactics of the Cartel lawyers. I really admire them. They are great. Perry is just out of his league and is clearly second string. No doubt about it. The Trial may then start in April or May 2011. There will be continuances because a Cartel lawyer got his dick caught in a zipper, the paralegal went on vacation and Cartel lawyers cannot find the papers, a Micron lawyer's dog ate the brief, you name it and the continuances will flow. The trial may conclude sometime in 2012, with judgement entry some time toward the end of the year due to all the post trial motions.
Due to SOL as well as the voluminous withdrawal of evidence because Samdung is no longer in the case and the settlement numbers attributed to past damages, the Cartel, after trebling, might collectively owe about a $100 million. The stock will absolutely crater from its highs in the teens to mid-single digits due to frustration and giving up the towel. There might be a sweetheart license with Elpida by then and we will still be hearing Sharon say during the CC we are in license discussions, blah, blah , blah and when we have something to announce we will let you know. Don't call us, we will call you. The Execs will load up on options, outstanding shares will edge up to 200 million and Rambus will need to work 2x as hard just to stay in place.
I think Korshand/BWS $30 target is too high. We reached the target of about $24 and change and that is it. Capstone will be revising shortly. Fred Hager will put the nail in the coffin for the first time by saying we still support the stock but are lightening our postion by half to invest in other portfolio holdings. CAN YOU SAY SINGLE DIGITS????????
John Danforth is out. BIG HINT people. If he doesn't know, nobody does. I would trust what he does versus the imbecile Harold "Har Har" Hughes, Sharon Holt "the Dolt" and Tommy "machine water-gun" Lavelle the Gazelle. Left holding the bag will be the triumverate of Best "the Wurst", AHolmes aka "the Cretin" and Rambusince "when?" They will still be pumpin' and blaming the cratering on guess who?
Keep dreaming. It will go up vertical if you turn the chart upside down. Any announcement will be very disappointing UNLESS they buy beaucoup shares. That WON'T happen unless the price is right. Before closing off their options and having a board meeting to decide, they will wait and see what happens in the market. If it goes into the teens as I suspect it almost certainly will, then Rambus can always call a special board meeting to announce the buy -back which might be sizable depending upon where the price is. The lower in the teens the better.
This could happen in a few weeks. Rambus buys a sizable chunk and the price will then "rocket" to the high teens and on an interday high touch 20. But then, it is business as usual and the stock repeats its predictable pattern and wends its way inexorably down again until the next interm catalyst. The sad thing is that there is no sustaining event on the horizon to stabilize the stock at higher altitudes.
This stock is pathetic and so are you to keep pumping it.
Well, Wurst, Rambus may be thinking of a stock buy back. It is possible. Why? Well they are gonna wait and see how low this goes. If it hits the mid-to-lower teens, management will have to do something to shore up the bleeding to avoid anarchy and overthrow by irate shareholders. The price will be a hell of a lot better then.
The good news in all this is that it could happen soon. The skids have been greased and in the next several weeks, with market cooperation Rambus will revisit the teens and your prediction on stock buy back may, indeed, come true.
Keep hoping Wurst but I guarantee it won't happen. Rambus needs the money and is not gonna take a chance and buy anytime soon and lose money as the stock trends down. The market will guarantee it. They are not gonna put in sorely needed cash only to lose it on the market roulette wheel.
Rambiskit, you state a conclusion without a premise. Why do they need to invest their money that way? Why isn't it better to use the money for other capital investments or hiring people or whatever. It seems to me that companies who do buybacks, especially small companies like Rambus, can't think of better ways to invest their money which, in turn, will have favorable effects upon the underlying stock price.
HH and the management, if you want to call it that, should have many options for what to do with the money. They have just turned the corner to profitability and now they should be announcing a dividend of stock buy back in order to communicate an expression of confidence in the company for Wall Street or the shareholders is not necessarily the best strategy. I for one would like to know what else they are considering.
More confidence is engendered by doing the business they are supposed to be doing.
LIKE, FOR EXAMPLE, SIGNING UP LICENSES WITH OTHERS IN ADDITION TO THE SAMSUNG GIVEAWAY. WHERE ARE THEY???????????????????????????????????????????
Trust me there will be NO DIVIDEND, special or otherwise. If there is a stock buy back it will not be major. Max is 5,000,000 shares and certainly not enough to wipe out the dilutive effects of the Samsung treasury share purchase of which half is guaranteed.
Most probably there will not be any stock buyback. Better to conserve cash and look for some other acquisitions because the present business model ain't working too well now.
Selling shares for cash is never dilution. The pie is cut in more pieces, but is bigger after the cash is deposited. You know that, yet you try to deceive people.
Your posts are getting more rediculous by the day, and your rants with abusive language are an embarrassment even to you.
You have been reported to Yahoo and will be gone in the next day or two. You are free to post anything you want here, as long as you are honest and civil. You are neither, and will be sacked. You will not be missed.
I suspect a share buyback would give a greater and more immediate share price increase which could be the catalyst needed to break the $26.41 high resistance level and set the stock up for the next leg up. JMHO