I didn't mean to say that they have bought shares yet.
I was simply responding to a post that I found somewhat mis-leading, implying that if they bought shares on the open market, it wouldn't affect BV. This would only be true if they bought shares priced right at book value. At significantly higher or lower prices than book, the purchases themselves will change the BV.
But I agree with you. I don't think they have bought many, if any, shares. As soon as investors analyzed and interpreted the press release, they bid the stock up to slightly above BV. I think BV is the floor for the stock price. For example, if the price tried to drop below 8, I (and others) would be buying on the assumption that the company would soon jump in and buy shares.
Since the PR, the stock now represents an unusual risk/reward situation. The floor is BV (except in the low probability case were they began to lose money), and the upside is whatever PE multiple the market will eventually pay for their earnings stream. The 500,000 shares is enough to provide a very strong floor for the stock price.
I find this type of risk/reward scenario very compelling, and my guess is that between now and the earnings release the stock will trade between 8 and 10. What happens after that depends on the earnings and forward looking info released at that time. My guess is that the info will be OK to good, and by the end of the year the stock will be in high teens. But in all the high probability scenarios, we now have a downside risk of only 8.
Paul |
