I normally don't get too worked up about share repurchase plans because (a) most companies who announce them don't follow through (b) the amount of shares being repurchased is small compared to the total shares outstanding/in float and (c) most companies that announce them are just giving top officers a ton of new options to offset the new shares they buy up - i.e. transfer of wealth.
However, this is an interesting announcement by New Oriential Education
New Oriental Education & Technology Group Inc. (EDU), the largest provider of private educational services in China ("New Oriental" or the "Company"), today announced that its board of directors has approved a share repurchase program. The board has authorized New Oriental to repurchase up to one million of its own American Depositary Shares ("ADSs") during the period from February 25, 2008 to December 31, 2008.
If they actually follow through and the detail on Yahoo Finance is anywhere near correct, this would be a huge amount of shares in relation to their float (for those of you unfamiliar with float, it is simply the amount of shares actively trading - i.e. some shares are held by insiders and/or in theory are not available to be traded). The float is listed as only 3.55M shares, so this would be the equivalent of taking nearly 30% of all floated shares out of circulation by the end of the year. [EDIT: Reader with Bloomberg access says Yahoo Finance is wrong and actual float count is 35M] Again, I take it with a grain of salt because some companies announce share repurchase after repurchase but never follow through. So we'll see at the next earnings release if they have started to buy back shares. If they do, this would be a good faith gesture and show the investing public they believe the investors of the world are undervaluing their shares.
I only have about a 1% stake in this name at this time since the stock is stuck below its 200 day moving average ($60). If we see some significant strength, it might be a name to focus on again. For now I am going to just let it simmer to the side while focusing on other opportunities in the portfolio.
Long New Oriental Education in fund; no personal position
2 comments:
Bloomberg shows EDU has 35 mln floating shares, not 3.5 mln
Thanks Hudson. One day I hope to have a real Bloomberg terminal instead of having to rely on lousy Yahoo Finance. I knew it was too good to be true :) They only have 37.5M total O/S.
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