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Boulder Brands, Inc. Message Board

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  • squidunker008 squidunker008 Jun 18, 2010 9:07 AM Flag

    Share buybacks

    They would not outrightly plan to manipulate the price, but management may take a quietly pre-planned advantage of the drop in stock price that they knew their announcement would cause.

    In February, the Board of Directors approved (through a special "shareholder" meeting) a management stock option incentive plan for 35 million shares. That would be almost 60% of the current open market shares.
    Stock options (no cost to the person granted them) usually vest 25% per year (one can cash in) until they hit 100% vesting (one can cash all in) in 3 or 4 years.
    The problem is that the company treasury must have real shares in the account to "sell" when an executive cashes in. So by 2014, SMBL must have accumulated up to the 35 million shares in the account at and for some time. They can do that by issuing more stock (what I think they will do) which will dilute and destroy the value of current holdings of "longs", or buy shares in the market (that will raise the stock price).

    Where will they get the money for open market purchases with 1 or 2 cent per quarter earnings, at best?
    They could and very well may issue debt (if an institution will provide the cash), then buy stock. More debt = more risk to the company, so maybe again down goes the share price! The company only has 22 cents of cash per share now. Bringing the cash to zero could buy less than 4 million shares at yesterdays closing stock price.
    Do not look to any big share buybacks this year. Late yesterday was probably some short covering adding a little rebound to the price. Today should be down.

    Disclosure: All may wonder why my re-upped activity and blogging on the stock.
    I am not short - I am too dumb to sell any stock short. I do look for trades in special situations. Here we have great products, currently unethical self-centered management, but a company of averge fnancial health.
    The products and product ideas and businesses are worth something, and management could wake up or be pressured by a powerful shareholder.
    So I look to potentially buy for a trade. The problem now (after the broadsiding announcement) is I will not pay more than 15 times current PE, or 22 time forward PE.
    That sets my price target below $2.50 (it may get there in August). If I am correct in my startegy, I feel sorry for current long holders of this stock.

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