As of the latest figures, approx 4.3m shares are currently shorted, being 3.44% of 127m issued shares. This is a higher percentage than for many XJO stocks, but nowhere near the highest.
The $50m buyback is enough money to buy back 3m shares at $16.66 each, or 4m shares at $12.50.
Recently on some days, more than 1m NEU shares have been traded, and the average number of shares traded per day is well over 0.5m.
I assume that the main reason for announcing the buyback is to placate shareholders who have been upset by the recent plummet in NEU's share price. I would be alarmed if many shares are actually bought back.
If NEU tries to attack shorters head-on with $50m and fails, which would be highly probable, then just imagine how low the SP will go after that. What could NEU do then? Throw another $50m at it? Or $100m? Even if they succeeded in creating a short squeeze, it could only be temporary. Once the ammunition has been used up then shorters can return in force. It would be pointless. Maybe they think that they have given themselves enough ammunition to mount several attacks on the SP, but they will be totally stuffed as soon as it all goes wrong.
I think that it would be financial folly for NEU to squander $50 on buying back shares at the current share price. If they try to create a short squeeze then the kitty could be emptied in a matter of days. And tinkering at the edges would only fritter away the buyback without achieving anything. I hope that NEU's management is prudent enough to keep the buyback in reserve in case the SP descends very low again.
NEU Price at posting:
$16.64 Sentiment: Hold Disclosure: Held
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