Tuesday, October 30, 2007

Viceroy Privatization Chart

In this 2 year chart you can clearly see downward progression of the company stock value. The share price came under tremendous pressure after the dividend was chopped and once again after it was completely eliminated.

The management claimed it was forced to eliminate the dividend in a bid to save cash in the face of deteriorating market conditions. This would seem to be truthful... but then after the dividend was cut and the stock dropped more than a dollar (into the $4.10 range) management announced a normal course issuer bid (stock repurchase), so the company was in effect spending money to buy back shares (repurchased over 70 000 shares in the 4$ range). Once the dividend was completely eliminated (management claims as a last ditch effort to save every penny?) the stock dropped even more. With the stock trading in the low 3 dollar range, the rate of the buyback was boosted into full force - from February 22, 2007 to July 30, 2007, Viceroy Homes repurchased over 200 000 shares. All told, 277 800 shares were repurchased.

So, on the one hand management eliminates the dividend to save money, but then it spends close to 1 Million dollars to repurchase its own shares... doesn't make much sense???

Was Gaylord Lindal thinking about going private the whole time? By buying back shares, there would naturally be less shares to oppose a deal, and Gaylord's share of the company would be increased, thereby enriching himself once the deal was announced.

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