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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: Marc Newman who wrote (22726)6/17/1998 3:55:00 AM
From: Gary Ku   of 42771
 
Can the company keep on buying back its shares to fuel the rally?
NOVL claims it will buy back up to 10% of its shares. If it does, what
will happen to the shareholder's equity? The following is the
calculation:

Total assets before buy back: 1902 M
Total assets after buy back (assume at $13 a share): 1447 M

shareholder's equity:

before buy back: $5.34
after buy back: $4.50

You can see the stock buy will dilute the shareholders's interest. If
that is not bad enough, let's wait to see when the employees execute
their stock options in July. The shareholder's equity will be further
diluted to $4.00 a share.
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