Totally disagree about the buyback, its a totally short term impact and does nothing for the long term benefit of shareholders. In fact it probably does the opposite.
If you are producing and have excess cash then no problem with a buyback whatsoever but when you have no income coming into the business, you need to hold your cash and deploy it in the right areas.
I'll give you an example where it didn't work out. A company in the UK called Heritage Oil. They sold some assets to Tullow Oil for around $1.5bn a few years ago, and gave shareholders a 100p special dividend (no problem with this) but then went on a rampage of buying back shares. I think from memory it was around $125m. The share price was around 300p when they started the buyback, its now around 160p. They had to raise additional capital at low values and their breakeven price on the buyback is essentially around 220p undiscounted (time value of money would make this even worse.
Whilst it doesn't work out always like this, its a danger sign for me when a company with no revenue / profits starts giving their cash back to shareholders, aside from windfall profit dividends.
KAR Price at posting:
$3.56 Sentiment: Buy Disclosure: Held
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