MicroStrategy’s stock has spiked around 47% since April 2005. Last week the company’s stock rose 10% in trading last Thursday and continued to rise further 5.7% during the Friday afternoon session, standing at $67.73 when Computerwire last checked.
MicroStrategy is reported to have repurchased around 2.1m shares – around 13% of its common stock pile – between the end of March and May at a cost of around $110m.
Wall Street analysts, wary of MicroStrategy’s checkered financial history, put a positive spin on the buyback saying that MicroStrategy’s stock is significantly undervalued between $46-55 per share and that it is accretive to earnings.
One analyst also pointed out that the repurchase also strengthens MicroStrategy’s CEO Michael Saylor’s stake in the company from 19% to 22%. Saylor has not touched his investment in the firm since December last year.
In April, MicroStrategy posted revenue of $60m for its first quarter, which fell short of expectations of $61.8m, which deflated the stock nearly 25%.
When a company repurchases its stock, it usually means it has more cash reserves that it needs for its business. Buying back stock is seen as a tax efficient way of passing this value to shareholders is to buy its own shares since each of the remaining shares becomes more valuable because earnings are spread over a small share base.
However cynics have pointed out that it is also handy for company directors because they are incentivised regular share options and when they come to cash these in they is always a buyer in waiting – the company itself.
