Investing

Bezos On Buybacks (AMZN)

This morning Amazon.com (NASDAQ: AMZN) has announced that it is retiring debt and will buy back common stock. Bezos & Co. has authorized a debt repurchase program that it may repurchase, redeem or retire, up to all of its outstanding…

By Douglas A. McIntyre
Published February 8, 2008, 9:01am ET · 2 min read

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This morning Amazon.com (NASDAQ: AMZN) has announced that it is retiring debt and will buy back common stock.

Bezos & Co. has authorized a debt repurchase program that it may repurchase, redeem or retire, up to all of its outstanding 4.75% convertible subordinated notes due 2009 with an outstanding balance of $899 million in principal; and it can repurchase, redeem, or retire its 6.875% convertible subordinated Notes due 2010 that has a currency converted balance of some $350 million or so outstanding. This debt repurchase authorization will replace a February 2006 $500 million debt repurchase authorization.  The debt matures next year and the year after, so it will probably just allow these to mature without replacing them. 

But Bezos & Co. is also announcing a $1 Billion share buyback plan over the next 24-months, which will replace the existing $500 million stock buyback plan put in place in April 2007.

While Amazon stock has pulled back some 30% from its 2007 highs of $101.09, this stock is actually up roughly 75% off of its lows and up 130% or so from lows over the last two-years. 

Are there no acquisitions out there that can be made with that $1 Billion?  With a forward P/E ratio for 2008 of 45 and with a near-$30 Billion market cap it can almost certainly find attractive buyout targets that would add another growth driver and simultaneously take out competition.

Taking away debt.. that’s good.  But at $70.00 a $1 Billion buyback wouldn’t even be a day and half of average share trading volume. 

Dear Mr. Bezos, kill the debt.  But kill the stock buyback too.

Jon C. Ogg
February 8, 2008

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Douglas A. McIntyre

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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