Trico Marine Services
(NDAQ:TRMA) shares rose $0.82, or 2.31%, to $36.27 today after the
company announced a $100 million share buyback program in which it will
repurchase around 20% of its outstanding shares during the next 12 to
18 months in privately negotiated and open market transactions.
Shareholders have been pushing for the overcapitalized company to
return some of its $16/share in cash to its owners and this buyback is
a great step forward.
Share buyback programs are one of the
most popular ways for companies to return extra cash to shareholders.
Repurchasing shares off of the open market both increases the stock
price and improves financial ratios. Stock prices tend to increase
since demand presumably remains the same while supply is shortened
which causes price to rise. Meanwhile, the company's EPS is typically
increased since there are less shares in the equation which improves
ratios like P/E, ROE and ROA.
Shareholders also recently voiced
concerns over the company's future direction. Sources in Norway told
one investor that the company received an offer to sell their North Sea
fleet at very attractive prices but the company failed to explore the
opportunity. The same shareholder also said they had reason to believe
that the company failed to exercise an option associated with a
newbuilding contract despite the fact that the option itself could have
been resold for a profit of $5-6 million. Clearly, the company has
missed opportunities to invest and missed opportunities to divest -
where is the company headed?
In the end, Trico is a healthy
company with a large amount of cash on its books that failed to take
advantage of some great opportunities at the expense of shareholders.
Now the company appears to be turning itself around, however, with the
introduction of a substantial share buyback program. TRMA is definitely
a
stock to watch going forward given their strong industry and new actions to unlock shareholder value!
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