The market has become so obsessed with dividends that a company buying stock at a 40% discount to net asset value (NAV) is often questioned for not paying dividends instead. In fact, American Capital, Ltd. (ACAS) recently announced completing an 11.4M share buyback in Q3 that will undoubtedly be questioned on the next earnings call.
The company bought the stock at an average price of $10.99, for a total cost of $125M. Considering the substantial purchases below book value, the transactions will add over $0.20 to NAV. A smaller buyback in Q2 at a slightly higher discount to NAV added $0.20.
American Capital is a private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites, and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital manages $17.2 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $101 billion of total assets under management (including levered assets).
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