Monday, February 22, 2010

Feeling little love from other shareholders, The KNOT buys its own stock (KNOT)

To be clear, they're buying shares with COMPANY money, not management's own.


The Knot Inc(KNOT) announced this afternoon that they would spend about $50million to buy stock on the open market.  This comes just a couple days after they informed the market that the loss of their Macy's registry business  - mentioned here in January - would be much more detrimental to profitability than previously thought.

NEW YORK--(BUSINESS WIRE)--The Knot Inc. (NASDAQ: KNOT -News), the premier media company devoted to weddings, babies, and everything in between, today announced that its Board of Directors has authorized the repurchase of up to $50 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions.

“We believe the repurchase of the Company’s shares represents an excellent long-term investment and that this action demonstrates our commitment to enhancing shareholder value,” said Chief Executive Officer of The Knot, David Liu.
The repurchase program will be funded using the Company’s working capital. As of December 31, 2009, the Company had cash and cash equivalents of approximately $95.0 million, and short-term investments of approximately $36.5 million, consisting entirely of auction-rate securities that are redeemable at par beginning on June 30, 2010, under the Company’s settlement agreement with UBS.


I'm not sure what the impact on KNOT shares will be, or should be.  When I look at a company's valuation, I always net out or add back cash, so to be it's not a "value-creator" when they suddenly use said cash to buy back shares.  Cant' say I disagree with management though, as their shares are not given much credit by the market, trading at big discounts to other firms with identical gross profits:


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