We sent a company down
the daily Walk of Shameearlier this week. In my eyes, it
had no business feeling guilty.
On Wednesday, fellow Fool Jim Mueller
lambastednext-generation movie maven
Netflix (Nasdaq: NFLX) for running a share
repurchase program with borrowed funds. As Jim noted, Netflix
doesn't really
haveto buy back any shares -- the company isn't in
the habit of using tons of shares or stock options to pay its
employees. Dilution is kept in check. Any buybacks, then,
must be motivated by a desire to return value to today's
shareholders. It's not a self-serving move, because Netflix
executives and other insiders together own less than 4% of
the company's shares.
Here's the buyback history that makes Jim shoot steam out
his ears:
Shares Repurchased
Amount Paid
Cost Per Share
Since Q2 2007
17.8 million
$545 million
$30.62
Q3 2009
3 million
$130 million
$43.33
Q4 2009 to date
1.2 million
Not disclosed
$44 to $51*
Source: Netflix conference call. *
Based on share price range from Oct. 1 to Oct. 22.
Management calls this a good investment; Jim disagrees
with a passion. Netflix is getting less bang for every buck
invested -- and is borrowing money to do more of it. Now let
me show you why this is a
goodidea. Continued... |