SVF has chargeoffs of around 4.5% last year, COF was around 3% in cards. Naturally COF predicted 4% this year while SVF predicted it would do even better!!! at 4.3%. They were wrong.
Now the market is selling a good lender who predicted rising defaults because a bad lender over optimistically predicted declining charge-offs.
Once again who believes in EMH? HA HA
lol if you did the example with 110 different shareholders the net result is the same. They cash out now and you own a bigger proportion of the stock.
So for example $110 valuation and 110 shares is $1 a share and you own .909%. Now if you buyback 10 shares you now own 1/100 or 1% of $100 or $1.
Similar a dividend with $110 valuation and 110 shares is 9.09 cents cent and you now the stock is worth $100 / 110 shares or 90.9 cents so in total it's worth $1.
As I said continue to delude yourself but you have no basis of fact in arguing vs me. You won't win because you don't know anything.
All you know is what guys like Cramer say on TV. Cramer paints stock buybacks with 1 brush. A stockbuyback can be bad when you buyback a stock that is overvalued but there have been lots of successful buybacks in history. Look at the reinsurance sector. They build value with buybacks.
Lots of CEO's over zelously buyback over valued stock making it a very bad investmnet. In Terex's case it's very undervalued if the $1.3 B excess cash is used correctly.
Putting $1.3 B into a 4% ROI is not a good use of cash. Ergo terex loses value cuz of it.
lol well again your coming from the school of thought of not knowing anything.
The mathematical proof a dividend and a stock buyback are the same is the following assuming the stock is at fair value. If it is below fair value it boosts value if it is below it lowers value.
Say your company earns $10 a year and has a 10% discount rate and there is $10 of excess cash. It should be valued at $110. and say there is $10 dividend. So you get the cash and the stock is now worth $100. Assume 110 shares and each stock is worth $1. Now the stock is worth $100 or $1 a share.
Say there is a $10 stock buyback. So now there will be 100 shares in the company. so not the value of the stock is going to be $10/10% or $100 which is $1 a share and you received $10 in cash.
Again it's not my job to teach you basic valuation. I can tell you're probably a fan of Cramer and therefore quite dumb. Who makes up that buybacks are terrible.
Even Buffett calls a buyback a tax efficient dividend since you don't pay taxes and you increase your ownership.
Perhaps learn something before arguing with me going forward. Since I won't explain concepts to you from now on.
You're free to delude yourself however you want.
lol u got owned in the debate below. Retiring $800 million of debt and getting an extra $36M of after-tax earnings and equity interest in a company at a 25 PE and getting $19.6 M or so in equity earnings after tax about 15 a year is hardly transformative.
Just think the company is taking the $1.3 B investment and getting back $50 M or so which is a 4% return on their investment.
Selling MHPS was a great idea but investing those returns into a 4% bond wouldn't be a great idea.
The MHPS sale was incredible and could potentially be transformative. Unfortunately Garrison told the world he would buyback debt which isn't a good investment especially at these low rates.
that should be further compounds the idea to not buyback stock. Also the first WACC calculation should have equaled a WACC of $9.5239%. You can see very quickly shareholders lose $50 of PV by buying back $50 of debt.
lol, if everyone knew it would fall through then why were people arguing with me on this board that it would go through. Why did you never make a post saying you agreed with me? Why is there not one article on all newspapers suggesting it? I am the only voice saying it. It's very easy to say everyone said it when they didn't.
Finally clearly you have no idea how to do a valuation model. Let's do a quick example. Say you have a business making 100 a year before interest with 2 shareholders and also have $100 of debt financed at 5%. Therefore it earns $95 a year and we can assume no taxes.
Also assume the Disc rate for the equity is 10%. Therefore the equity has a value of $950 (95/10%) and the debt has a value of $100. A total enterprise value of $1,050
Therefore the WACC would be
950/1050 * 10% =9.047%
100.1050 * 5% =0.0047
WACC = 9.051761%
Let's say it now sold part of its business for $100 which is $10 of earnings. It could use this $100 to buyback stock or buyback debt. The company would now have $90 of earnings at a WACC of 10% or $90 equity value if it buys out the debt therefore it now has total value of $900.
Or it can buy back $100 of stock at 950 or 10.52% of the equity. which it chooses to do. It now has $85 of earnings divided. $85 is the original 100 less $10 sold and $5 interest payment
850/950 *10% =8.947%
100/950 * 5% =0.0052631579
WACC = 9.4733%
Now 90 / 9.4733 is $950. the equity has a value of $850 and it also received the $100 already in cash so its PV is $950.Therefore the equity lost $50 of PV by buying back debt instead of stock.
And you're not going to beat me on arguing valuation. Furthermore comparing dividend payment vs debt is pretty dumb because shareholders get the dividends so it's not money saved it's money in their pocket vs money not in their pocket. Furthermore and lastly if earnings are growing it further compounds the awful idea to buyback stock. Since earnings will be greater in the future.