Corporate Buybacks And Gateway Buys

Corporate Buybacks And Gateway Buys

You’ve heard talk about a flurry of corporate buybacks in the wake of the September 11 attacks. Maybe even a bit about high-profile corporate execs pledging to buy some for Team USA. Both are well intentioned, yet obviously have different motivations and different outcomes. Still, if you are anything like us, you’d welcome either, if for no other reason than their calming effect on investors.

This is no time to be skeptical, but if you’re anything like us, you’ve also been watching the tape and questioning the veracity, or least timeliness, of some of these buyback announcements. It has always been our position that we’ll believe in a buyback when we see it. In fact, on average, roughly 70% of the shares authorized for buyback since 1994 have in fact been repurchased.

In a real sense this is good news, at least if you’re a fan of buybacks. After all, in September alone more than 170 companies announced intentions to repurchase more than $30 billion of their companies’ shares. If corporations stick to anything near their historical rate of follow-through, they will be buying back a whole lot of stock. Which could come in handy should selling pressure persist–and hopefully prove prudent over the long-term.

As for execs buying for their personal account? We’ll be on the lookout. As you know, insiders file evidence of their trades on the 10th of the month following the trade. That said, there is no law against filing early, so we expect to see some action soon. And contrary to our usual skepticism, we’ll take it–even if it is more than anything symbolic.

Just prior to the September 11 attacks, Gateway Inc. (GTW) front man Theodore Waitt and others took advantage of the stock’s weakness to add to their positions. From August 31 to September 7, three insiders acquired a combined 853,000 shares, including 13,000 shares on the open market at $8.60 to $9.09 per share. Waitt himself exercised three series of options to acquire 840,000 shares, with his first acquisition since taking the company public in 1993.

This sudden burst of activity is not only the first significant round of accumulation at Gateway since insiders bought at the IPO, it is the largest in company history. While this is impressive in its own right, Waitt’s recent accumulation is even more so, given that he has been an almost systematic seller over the years.

In fact, insider selling had been the norm at Gateway in its heyday. That Waitt has now reversed course along with newly appointed CFO Joseph Burke is striking. Even more so given that both Burke and CTO Robert Burnett purchased shares on the open market while their options are underwater. That Gateway execs had refrained from selling at depressed levels was a relief; the recent activity provides an even stronger vote of confidence.

COPYRIGHT 2001 American Banker-Bond Buyer

COPYRIGHT 2001 Gale Group