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Radian Group Inc. Message Board

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  • sleestack76 sleestack76 Jul 22, 2011 4:02 PM Flag

    Time To Announce A Buyback

    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.

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    • Plus I really think they need to shake the bondholders out of complacency. It has to be incredibly frustrating for RDN management to see the stock price at $3.30, everyone is questioning your future, but yet your near term debt is trading at 95 cents on the dollar. The debtholders think they are covered by all the holding company cash, so they aren't budging.

      Back in 2009, RDN was able to buy back debt at a really nice discount. Imagine how great it would be if they could buy back the 2013 debt at 70 cents on the dollar?

      So they are kind of in a catch 22 situation - they are worth a lot more than their current market cap, but part of that is because they have all that holding company cash that gives them flexibility, but the bondholders believe that is all theirs.

      A nice small buyback should balance the valuation between debt and equity holders a bit more.

    • That's conventional wisdom, of course. I disagree with the conventional wisdom. You're assuming money spent now on a buyback has no time value. In any strategically run business, money always has time value.

      And, per above, if they only want to do something to benefit shareholders, a dividend puts more money into shareholders' pockets than a buyback. Including in the long term because I can drip it and even if I don't drip it, I can put it to work in some other way.

 
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