Washington Post Co. stock buyback news: What does it mean?
Today, The Washington Post Co. announced that its directors have authorized the company to buy back up to 750,000 shares of its Class B stock. What does that mean?
Like some other media companies (such as the New York Times Co.), The Post Co. has a dual-class stock ownership setup. One class of stock (Class A) has voting rights and board seats and is held by the company's owners, such as Chairman Don Graham. Regular folk cannot buy this stock. The other class (Class B) is available for purchase by anyone, but it comes with significantly less punch.
Families typically use dual-class ownership structures to retain control over a company while enjoying access to the capital markets. It can be a best-of-both-worlds arrangement: As a partially public company, you can sell stock to raise money, and as a sort-of private company, you're less beholden to your public shareholders and their feverish quarterly demands.
Today, The Post Co. did not buy back 750,000 shares; it was just given the authority to do so if it wants.
Why do companies buy back stock? Buying back stock removes it from circulation, so that means the value of all the remaining stock goes up. It's a way to boost stock price. This means it's a way to return value to shareholders. Another way is to increase the dividend, which The Post Co. also approved today, hiking it from $8.60 to $9 per share.
It's also a way to spend cash on-hand, if the company does not have much debt and if it thinks its own stock is a good value.
Including cash, The Post Co. has about $900 million in available liquidity, i.e., money sitting around. It has less than $500 million in debt, which is not due anytime soon. Shares of Post Co. stock closed today at $446.82. That's well off the stock's high of more than $900 per share, which was hit around the turn of 2005. So if the company thinks the stock is going to go higher, it probably considers it a good bargain.
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January 21, 2010; 6:03 PM ET
Categories: The Ticker | Tags: Washington Post, stock buy back
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