SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : 3DFX
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: RDH who wrote (7395)9/18/1998 3:42:00 PM
From: Patrick Grinsell  Read Replies (3) of 16960
 
What to do with all that cash???

RDH said:

Buying back shares make sense if it is the best use of cash on hand. It can reward
shareholders in two ways: it decreases the number on the market and can provide a
nice Return on Equity if the stock was truly undervalued (and if it is a better
investment than anything else the company could do with the money).

I totally agree. It's a matter of best return for the cash. Assuming 3dfx has 100M in cash that puts cash value at $6 per share. This is what the ridiculous bottom should be and we are a mere 3 points away. Everybody who's saying 3dfx should concentrate on execution is missing the point. This IS part of their execution. With half the number of shares outstanding the company will execute twice as well. Not only that, unlike R&D or advertising, this return is GUARANTEED!

I can really only see one use for the cash (other than a protective buffer) that might yield a greater return and that's buying a boardmaker (hopefully Quantum3d). As the price get lower, even this alternative won't be as attractive.

Take the following illustration to see how silly it can get*:
If we hit $6 per share. I'm going to a bank and getting a swing loan to buy the company and pay off the loan with all the cash 3dfx owns. I will then fire everybody and sell off the inventory and accounts receivable for a hefty profit after paying debts. As I'm firing Ballard I'll tell him, "I realize you had some other uses for the company's cash. Guess what, so do I."

*For certain technical reasons it is not possible to do this. The example is meant only to display opportunity cost.

Pat
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News