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Why not buy back shares when the price is low, and particularly, when the price goes below book value, as it did last October? First, if the company bought a significant number of shares to make it worthwhile, it would have boosted the price considerably above book. Second, when a company is in a fast growing business, if it buys back shares, it may find itself UNDERcapitalized. Third, a company must weigh every investment opportunity and choose between, say, buying back shares or using its cash flow to grow the business (e.g., complete its investments in overseas manufacturing capacity). I think they did the right thing. If we were talking about a mature company, such as GM, it would be reasonable for GM to buy back some of its shares, as it probably will do with the heavy cash flow it is getting currently. But, thank goodness, SNDK is no GM! |
