Stratasys announced a curious program to repurchase their own shares.
The company announced:
“Its Board of Directors has authorized a share repurchase program allowing for the repurchase of up to $50 million of its ordinary shares.”
This represents, at current share price levels, about nine percent of the company. Effectively, this would take those shares off the public market and somewhat constrain demand for the remaining public shares. In other words, this will likely provide a boost to Stratasys’ stock price.
Looking at Stratasys’ latest financials shows they have about US$150M in liquid assets, along with a massive US$150M in accounts receivable. It’s clear they can afford to make this move.
I say this is a bit curious, because the company has posted significant quarterly losses in the past two reports. Why spend your reserve cash when you might need it to cover future quarterly losses?
I believe the story relates to the company’s previous announcement of a huge expense-cutting program, where they intend to lower annual costs by about US$40.
If they are able to achieve this level of cutting, then those quarterly losses will turn into profitable quarters, and the company’s stock price will no doubt rise significantly. It would be one of the few large-scale 3D print players demonstrating profitability if this happens.
By reclaiming stocks now at presumably a price lower than the price would be in the future after expense cuts, they could be “buying low to sell high later”.
Assuming this plays out as suspected, then Stratasys could in the future issue more public stock — at a higher price. This would raise more money for the company, essentially turning today’s low value into higher value later.
Stratasys isn’t actually buying back the stocks today; the board of directors resolution merely allows the company to buy up to that amount of stocks back at a time later of their choosing. Presumably they will select purchase timing and methods to optimize their financial results.
It’s a curious move, but also seems quite strategic, and shows that Stratasys has some confidence in the effectiveness of their stock buy-back program.
Via Stratasys
