Q: DR Medical Facilities Corp.
What's your opinion on their "Dutch Auction?"
Forecast for the future of this stock, is it worth holding or time to sell?
Thank you.
What's your opinion on their "Dutch Auction?"
Forecast for the future of this stock, is it worth holding or time to sell?
Thank you.
5i Research Answer:
DR has excess capital following an asset sale, and thinks its shares are undervalued. Cancelling shares, of course, also saves it from paying its dividend on those shares. A lower number of total shares increased the company's per share earnings leverage and can boost valuations if things go well. Price range is $15.50 to $17. The $81M is about 20% of market cap. Shares tendered are likely only to see a partial purchase (if all shares tender). Generally, in these scenarios we do not suggest tendering. We need to assume the company knows its business and outlook better than the 'Street' and it is putting its money on this conviction. The stock is very very cheap at 6.8X earnings.