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Biotech / Medical : GUMM - Eliminate the Common Cold
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To: Mark Marcellus who wrote (3925)8/11/2001 10:38:16 AM
From: Mike M  Read Replies (3) of 5582
 
Waiting for short squeezes to be created after stock buyback announcements is an exceptionally poor way to make money.

Stock buybacks are not my favorite way to use the money but they do express two things. One, they aren't going to let the shorts manipulate the stock and two, they can remove a significant amount of the float if they want to.

What I find really interesting is that GUMM seems poised to buy back stock in the 8's after having sold a chunk of it to Wrigley at $7.50.

I don't remember reading that they planned to buy in the 8's. I doubt management will in fact buy back much of the stock. I suspect, instead, that shorts will begin to do this in increasing numbers as they find the stock not a very lucrative play.

I also wonder why a company with such great growth lying in front of it has no better use for its cash than a stock buyback.

The interesting thing is that they have an awful lot of cash right now. Much more than they have ever had...and they aren't very capital intensive. It remains to be seen what they really use their cash for...and what other imminent sources of cash they might have.

However, my own sneaking suspicion is that this buyback is at least partly intended to protect the stock price when Wrigley dumps their shares at the end of the lockup.


Think about that one Mark. Wouldn't be much point to selling the stock to Wrigley in the first place, particularly with that much money coming from the sale of the manufacturing plant if they were just going to buy it back in a few months. Seems to me you need to think a little further out of the box or, at a minimum, avoid exposing shallow opinions.
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