RE:Share Buybacks & Use of Cashlongrun86 wrote: I will start out by saying that this post contains "speculation" on my part.
An interesting point was made with the release of the Q2 results. Knight had made no further purchases under the NCIB. While the share price had appreciated somewhat, I don't think that it moved too far out of "value" territory.
Given the comments made by Management and the strategic use of capital, I believe that Management has identified better opportunities for the deployment of the current cash balance through both organic and in-organic opportunities. Time will reveal if this is in fact true.
The other potential view is that they view the "investment & loan" portfolio as requiring a bit more time to play out and reach maturity where they can realize the value and convert to cash.
I look forward to seeing Knight grow and make strategic investments in the coming quarters.
LR
It's possible they've identified some bigger opportunities - perhaps even likely. With that said, here are some points that I believe affect the management's logic for buying back shares:
+ Potential opportunities for Mexico and/or Canada in the horizon. Something could have come up in Brazil or Colombia as well.
+ Lower cash balance than before. Given the current share price (=can't sell shares to the market), we need to maintain a certain level of cash just in case opportunities pop up.
+ Increases in working capital/inventory for Q3 and Q4 mean that cash flow from operations is restricted for the remainder of the year. (On the other hand, we did get the $5.9M settlement fee + the US$5.5M Synergy loan reaches maturity in 2022, so there's some money coming in.)
+ Even if we don't have huge deals in the horizon, upfront payments for new in-licensed drugs can still require money in the tens of millions. IF my calculations are correct, we spent $30M+ on these types of deals in H1/22.
+ I doubt this management wants to take the risk to be desperate for cash at any point.
With that said, they
did launch the NCIB. In other words, the buybacks will continue should we reach a certain price level... but I'd guess the return has to be even higher than before for that to happen, given the conditions we're in.
Hopefully the main reason is opportunities in Mexico and/or Canada. :)