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Aus, good point on repurchasing stock when the price is low. Note that the situation with Spartech is not quite the same as with SNDK, however. Spartech pays a dividend. Repurchasing shares thus reduces cash outlays for dividends, in addition to increase the earnings per share. In general, and obviously this does not always apply to every situation, a company should consider repurchasing some shares when (a) the price per share is for some reason abnormally low and (b) when the rate of growth, or lack of it, justifies a smaller capitalization. Where a company is growing very rapidly and cannot predict what expenses it may incur (e.g., writeoff of old, outdated inventory, manufacturing problems at new plant, etc.), it may be justified in buying shares that are ridiculously low, especially if it contemplates expanded stock option programs for its employees. I must agree that if I had been in Cindy Burgdorf's shoes last fall, I would have been tempted to repurchase up to 1 million shares, even if I had to do a short term borrowing. But I must also admit, as a shareholder, that I was happy to have an opportunity to buy at those ridiculously low prices, and also recommend the stock to my clients. |
