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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar May 4, 2005 10:03 AM Flag

    Stock Repurchase Plan!

    Sorry to argue, but if they repurchase shares at $27, the value will (at least initially) go down not up. Shares are not worth $27.

    It may be a good *trading* play as a method of terrifying the shorts. But it's not a value play.

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    • Isn't this a kind of shot across the bow at the large short position? I think of the dividend announcement and the stock buy-back as positive action to try to reduce the short position and increase value on the basis of simply fewer virtual shares on the market.

      • 2 Replies to thebelltolls4whom
      • Sure, the extra shares affect the scarcity of shares, and change the negotiating position of people who want to buy or sell shares. But hypothecated shares still pay out dividends, spinoffs, pretty much anything that comes out of the stock. So unlike issuing options or similar, shorting doesn't reduce the intrinsic value of the stock. (The intrinsic value of a share is its value to someone who never ever trades it.)

        Anyway if I were a shareholder, then at $27 I'd much rather see a special dividend (funded in part by shorts) than a share buyback. If a new wave of selling knocks the share price down to $14 or something, then the buyback will make a lot more sense. The question is, when (if ever) will the company actually place orders for shares.

      • Yeah I think it's a shot across the bow. And it comes at a very interesting time. The big short positions probably start going underwater somewhere around $30 to $35. By $40 nearly all shorts would be underwater.

        So this is a gut check for shorts: how do they feel about paying dividends to lend out cash?

        Frankly, though, NLS shorts have never seemed to care about losing money. I suppose it's managers calling the shots, and it's not their dough vanishing. Would they finally panic at $40? I dunno. Maybe. After watching NLS shorts ride calmly up from $10 to $27, I'm convinced that they must be ex-marines. They have way more nads than brains.

    • I would rather they hike dividends. I don't know if it is worth 27 but I do know it is not far out of line with valuation and hence I am holding it still. I have another tout for you, IBA. I have recently added to my 3 year old position in the stock.

 
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