As strange as it sounds given the challenges this industry is facing, RDN would be wise to announce a small buyback during their call. Spending $45M to buy back 10% of the float would be worth it.
As much as stock price shouldn't matter, it does matter to their counterparties, potential investors, rating agencies, regulators, etc. Let's face it - in this day and age, people look at stock price as an indicator.
What is really ridiculous about this sell off is the other indicator, the bond market, is signalling business as usual. That is where RDN could really make an impact, buying back debt at a deep discount, but the 2013 debt is still trading at 95 cents on the dollar.
So the bond market is saying not much has changed since January, while the stock market is saying the company is worth 75% less?
Put another way, last year when RDN stock went down to the 6s, the 2013 bonds went down to the 80s. So by that measure, the bonds should be well below 80, not 95 where they are.
Another advantage in spending some of the holding company money is it might scare the bond investors a bit, helping lower prices and providing more attractive buy back opportunities.
Worst case, do they think they couldn't issue $45M of stock at $3 in a few years?
RDN management is pretty savvy, I wouldn't be surprised to see they take some action on the stock price when they release earnings.
i wish they would do a buyback or anything that would make the stock go up. I have conversation not too long ago with emily riley and she told me she has had alot of people suggest this share buyback to her, however, she told me they needed to protect thier cash right now. Sooner or later rdn goes up. I got out around 3.60 and was going to buy in at the low on friday, but wanted to wait till monday and protect myself incase they dont reach a debt deal. This sounds horrible but i would like to see some kind of sell off in the markets to get back in, but i dont see that happening.They always wait till the 11th hour, so about an hr before asian markets open,lol.
Should add that my most preferred use of capital also provides exponential growth. That use is to invest in increasing net profits, assuming opportunities exist to do so productively. A compounding, positive ROI is the most powerful engine of all for exponentially increasing shareholder value.
Hsve to disagree. If a company can think of absolutely nothing better to do with their capital than purchase their own shares, it lacks vision. Best use of my equity is for the company to reduce its expenses (including paying down debt) and grow its revenues. I don't need to know anything about the industry to know that much.
If management really can't think of a single useful thing to do with excess capital and just wants to reward shareholders, then give 'em a dividend. Share price will pop up nicely on that news as well; twice as nice.
A small buyback would also not hurt. It is a matter of increasing accretive normalized earnings per share. RDN currently has 133 million share outstanding. Buying back 30 million shares over two years could do wonders for the Earnings per share and not change the liquidity of the stock that much.
I definitely agree with the dividend although they already do pay a very small dividend. Personally, I think that if they raised the dividend to $.10 per quarter, a lot of shorts would cover on the news. They could then do a share offering when the stock price increases a good amount. It seems a little sleezy, but a little slick at the same time.