If a company hasn't set up a 10b5-1 program, the guidelines you've highlighted are generally accurate.
That said, if a company sets up a 10b5-1 program, that can allow them to repurchase stock during black-out periods because the program was established during a period when the Company wasn't blacked out and will operate within the parameters established in the 10b5-1 program. So for instance, let's say Micron established a $2bn share repurchase subject to a 10b5-1 program that is executed with one or more brokerage to buy back the stock at some discount relative to the VWAP (volume weighted average price) over a certain period of time they could do that and no black out dates would apply. They could have set this up on implemented it on Sept 1 or even in August before the black-out they are currently presumably under was imposed. If they went into negotiations to sell the company, that might change things (the company may choose to stop the 10b5-1 repurchase program for the sake of optics), but generally they should be able to buy back stock regardless if a 10b5-1 program has been established. These programs are also often used by executives to sell their stock regardless of blackouts.
Now I haven't seen anyone discussing this, but I think its worth considering the following. I think there are few on this message board or (anywhere) that think that Micron is silly cheap that think they shouldn't buy back stock "hand-over-fist" at these prices. What should be recognized though is this. I think it unlikely based on Micron's approach to capital allocation so far to do any more stock buyback than, say, $2bn per quarter (in line with the amount of debt they've been paying down up until now). $2bn at ~$45 per share is approximately 45mm shares per quarter. There are approximately 60 trading days per quarter. That means that if Micron spreads out its share repurchases evenly throughout the quarter Micron will be in the market every day buying in about 750k shares. Micron on average trades about 38mm shares per day so 750k represents a mere 2% off average daily volume. Also stock repurchase rules typically preclude companies from buying back stock at the start and end of the day (I believe companies are precluded from buying in their own stock for the 1st and final half hours of the trading day) so as to limit their ability to influence the opening and closing prices of the day.
Point being this, if Micron spreads its stock repurchase out relatively evenly over the quarter, I doubt that the buying support for the stock will be all that perceptible. It's possible, and one can hope that they do this, that Micron does accelerated share repurchases (ASRs) each quarter for as much as $2bn. That would front end load the stock repurchase each quarter, send a strong signal to the market and retire 75% of the shares associated with that quarter's stock repurchase activity immediately (which would help in the average share count calculation)- but ASRs of even $2bn in size could be done probably very quickly (in less than a month) and wouldn't give buying support throughout the quarter.
Big picture, at this valuation stock repurchase looks like a no brainer (assuming the Company is still as bullish on its outlook as it indicated at its investor day). But Micron is a very heavily traded stock and it's unlikely that this $10bn share repurchase program is going to mop up all the fast money in the name. |
