Could it be that buying back shares is kinda like banking your extra cash till you figure out what to do with it? I mean, if they just kept the cash, they would have to distribute, right? This way, as n84 said, they can re issue the shares when they want the use of the money.
That's probably completely wrong, but it should generate some good discussion :)
As usual I am buffaloed by the market reaction. This time no different. And if anyone could explain to me why a mREIT buys back it's own shares I am all ears. I know why regular type companies do it. But an mREIT? I thought they were all about raising capital, not spending it unless it generates income.
Elementary, my dear Watson, when the earnings report isn't that great, beef up the book value with a stock buy-back and dazzle the shareholders with the balance sheet (not to mention increasing share price when those shares are bought by the Company).
1) Currently the price of MBS is high. It's come down off the all time high at the end of Septermber but is still really high. So doing a secondary right now is not a good idea. You don't want to buy MBS at an all time high. The only caveat on this is if their price drove so high over book, I have no idea what they would do. Maybe they would go do a SO again.
2) Since the odd's of doing Secondaries are slim to none, why not buy back shares if the stock price falls below book.
Some of this I think is just a strategy to ride out QE3. Probably nobody knows how long the price of MBS will remain elevated like it is.