To: The Board
Overall, I do not understand all the flap about the stock buy-back being a waste of corporate funds or being a "bust". At these prices, (if you believe the stock is undervalue), then I'm glad DCTC has some cash to pick up some of these shares. DCTC will use them later for future acquisitions (hey, go figure, the stock could be worth more in the future - at least that is what I'm banking on. If you don't believe the stock price is going up in the future, then why do you own the stock?). DCTC has to come up with $6 million dollars worth of stock for the WPC deal. They can either a) issue another 3 million shares (then I'm sure we'ld here complaints about stock dilution) or they can b) buy-back as many shares as possible at these prices (2.5 to 2.75 million shares) and deliver them to WPC. That deal would then basically become non-diluting. Note: I'm not saying they are going to get all their shares at these prices. To put it another way, DCTC could have given WPC the $5 million in cash they are spending on the buy-back, but either way the money would be gone. Just think, if DCTC can get all the shares at these prices, they brought in $15 million in sales and $1.5 million in earnings via the WPC deal with minor share dilution. Not bad!
One can always make the argument that there are better opportunities out there than spending money on stock. I guess I'm just dumb enough to believe that the management of DCTC has a better understanding of where, when and how to spend the funds. So I'll let them do their jobs. I'm sure if DCTC finds a better place for the money, it will discontinue the buy-back or make the deal with the stock it repurchased. I guess I believe that they'll get the job done one way or another.
As far as the buy-back being a "bust". The only reason people are saying that is because the price of the stock has not gone up. If you're a short term trader, tough luck. You made your play, it did not pan out - move on (or become a long term holder). If you are in it for the long haul, the current stock price should not bother you. Relative to the buy-back and stock price, as has been numerously repeated on these boards, DCTC can only sit on the bid. They can't create demand and they can't create a solid floor if the MM squeeze the bid-ask, as DCTC has to be at ask-$0.06. Plus they can not trade in the first and last half hour of the day. Also, it is managements goal/respondsibility to get every share as cheaply as possible. That will create the most shareholder value - in the long run. I'ld hate to be in Joe M.'s shoes because no matter what he does, someone will always criticize him.
I'll repeat something I put in a previous post. Don't focus on the stock price. Focus on the business. Is the business going in the right direction, building a foundation for future growth, revenues and margins increasing, balance sheet improving, etc??? If so, the stock price will take care of itself - in the long run.
JJ |
