Share BuybacksLets guess that ARX has purchase back 50 million shares, we will not know until after this quarter but that is my guess.
So i am making the assumption they now have roughly 680 million shares outstanding.
Lets assume a buyback price of 16 dollars, so it would of cost approximately 800 million dollars.
ARX will save the cost of the yearly dividend of roughly 40 cents a share, or 20 million dollars for the year. ( Chicken Feed )
So 20 million dollars will will be the improved FCF ARC will get from these purchases. This is about 3 cents per share in improved Cash Flow after spending 800 million dollars, sounds like a great return.
Hedge Buybacks
If they spent the same 800 million on hedge buyback, it would result in 800 million or more FCF. That would be about $1.15 share in improved earning and the cash would still be in the company. It still would be on the balance sheet in the form of earning or reduce debt.
With Share buybacks your thowing the cash out the window and hoping the market gives you a fair evaluation, however it is contingent on things like Management Performance which is highly in question at Arx, Cash Flow, and Business Strategy.
Interest rates are going up and you can now get GIC at a 3% plus, making ARX dividend measly and way to low. People are looking at a potential market pull back.
You can throw your cash out the window buying back shares and if the industry does not like your management team, if your growth plan is weak and not communicated or your dependant on Treaty8 nations for your future, good luck with that.
Really i don't agree with share buybacks and increasing cashflow and dividends and production would be the best thing for shareholders. Share buybacks should be opportunitstic, and a line item for accountant to put a dollar figure into every quarter.
IMHO