Avigilon ~$18 Million Stock Buy Back Again

By: John Honovich, Published on Nov 12, 2015

Earlier this year, with the stock trading in the ~$18 range, Avigilon bought $39 Million of their own stock. Now, the stock is down under $12.

But Avigilon's confidence in itself has not waned, with their recent purchase of another $18 million in stock.

In this note, we examine the move and its competitive impact.

Buyback *******

**** ********* **** ** October ****, ******** ****** back ~*.* ******* ****** at ** ******* ***** of ~$**.**. **** ** in ******** ** *** / ****, ***** **** ****** *.* ******* ****** at ** ******* ***** of $**.**.

Price ******** ******** ** ********

**** *****, *** ***** increased ****** *** ****** of *** *******. ** May / ****, *** price **** **** $**.** to $**.**. ** ********* / *******, *** ***** rose **** $**.** ** $14.23. *******, *** ***** is *** **** **** to $**.** ** *** date ** **** ***********.

$100 ******* ********* ******* $** ******* ******

** ***** ****, ******** sold ~*.* ******* ****** at $** * *****. At *** ****, **** told ********* **** ***** use *** ******** "**** *** ******** *** general ********* ******** *** for ********* ********* ************." *** **** **** ****** back ** ***** ** greater ****** ** ****** ** ~$16.

***********, **** **** * lot ** *****. *** ~$44 ******* ****** ** the ******* ** ~** ***** net ****** *** **** so ***.

** *** ***** ****, this ***** **** *** mistrust / ******** **** many ********* **** *** them (*.*., ******** '************ **********' / 'Authoritarian' *********** *** ***** ** Rebuild ******** **********) ** ********.

*******

******** ** ***** **** peak ***** ***** ** ~$34, *** ***** ** ~$12 *** **** *****. However, ***** *** ***** decline ** ********'* ******* growth **** *** *** increasing *************** / ********** of *** ***** ************ industry, ***** ** * real *********** **** *** stock **** *** ** much ****** ** *******.

******* ** **** ** or ***, *** ********* buy ******* ** ****** shows **** ********'* *** is ***** ********* ** the ********* ** ******** and *** ****** ** the ***** *****. ** was ********* ***** ** May / **** ****** at ~$**, ***** ****** the ********* *******, *** it ******* ** ** seen ** **** *** turn ** ****** ***.

Comments (5)

Undoubtedly, they made a lot of money. The ~$44 million profit on the buyback is ~2x their net income for 2015 so far.

How can you make money buying stock when the price goes down after you buy it?

Two separate issues. I sell you a painting for $100m, you sell the exact same painting back to me for $50m. I made $50m, yes? The valuation of the painting now declines to $30m. Then I have an unrealized lost for $20m and still $50m cash from the original transaction, yes?

I sell you a painting for $100m...

Hold on, what did you pay for the painting? $0, $10m, $200m.

Let's say for arguments sake, $10m.

Subtract $10m from $100m. You have made $90m. Retained earnings: $90m

You sell the exact same painting back to me for $50m.

Ok, what is this painting worth at the time I am selling it back to you? $50m.

$50m painting for $50m of cash. No profit or loss. Retained earnings: $90m

The valuation of the painting is now $30m.

You have a paper loss of $20m. Retained earnings: $70m

You are $20m poorer now than when you decided to buy back the painting, right?

The assumption for Avigilon is obviously that the stock is temporarily undervalued, correct?

Avigilon is not thinking, "Damn, we know the stock is never going up and may soon go to zero but let's buy it anyway."

That's why I m saying they are making money at it (or at least hope to, because from their perspective, it is temporarily undervalued).

Avigilon might be right and might make money but the investors who bought in at $29 are clearly the big losers, made more painful by the fact that Avigilon used their investment not to expand but to buy back at a lower price.

This is why only invest in things I understand, like Skittles.

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