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Smith & Wesson Holding Corporation Message Board

  • je.starling je.starling Mar 25, 2013 4:18 PM Flag

    Secondary Offering

    So why are some people on this board concluding that the secondary offering by SWHC will be stock and not debt instruments? Why would it make sense for SWHC to do a secondary offering of additional stock when they stated they are committed to buying back stock? Doesn't that defeat the purpose of the stock buyback?

    The logical conclusion is that the secondary was announced either (a) to ward off a hostile takeover through acquisition of the company's stock, or (b) for debt issuance to expand capacity or buy parts of Freedom Group.

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    • rockwoodpaul1@gmail.com rockwoodpaul1 Mar 25, 2013 5:16 PM Flag

      Probably because most of us don't know much / anything about debt issuance and assumed that if an acquisition is on the horizon that would mean flooding the market with more shares.

    • Nobody has ever said I am a suave speaker, but this one will be blunt as I have covered this multiple times in the past week.
      In my opinion SWHC is colluding with investment firms who want/need to sell out, thus SWHC announces share buy back plan at market top (Why not at market low or even the $3s??) This allows Insty's to exit stock while Company and retail buy.
      Secondary comes out towards the end of buyback and stock gets hammered. Insty's come in and buy while retail scrambles and sells.
      This new buying by Insty's will help SWHC and they will also offer upgrades for the favor management did for them.
      #1 lesson to learn, when mgmt. talks about shareholders, they don't ever mean retail investors like you or me. We are the fodder that keeps both mgmt. in place with perks, salaries and bonuses and Instys making money via stock price.

    • You are right. Debt will be used to acquire.

      Stock issuance (sale of stock) is not efficient. The company can easily afford additional debt carrying costs.

      • 2 Replies to pow_351_go
      • Americansmostwanted.....good post. At least some people understand the situation.
        The buyback has really been used for the purpose to prop up the stock and to lull retail into waiting out any fall. Just amazes me when companies do buybacks at peaks. Home Depot doing same thing. Stock was over $70 and they announce buyback. Didn't say a word about it in the $30's.
        Lowes on the otherhand announced buybacks in the 20's after their stock dropped as low as $18. Their stock has done well since then, but both of these companies bought back huge blocks, not $20 million, then $15 million.
        $250 million Secondary dwarfs the piddly $35 mil spent at market top. Guess the saving grace is that the Secondary wasn't announced and priced sub $5.00. Actually, if they did that back then the company would have been taken over because stock would have had a cap of about $100 million then.

      • Or, the rumors of banks not wanting to lend money or offer any banking services are true and no one wants to help S&W with debt to acquire a piece of Freedom Group.

        So they could be forced into a secondary. I'm sure a bank somewhere isn't afraid of making money either way, but you never know if that is the driver of a decision like this.

 
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