China Finance (JRJC) announces buyback; should buyers beware?

| About: China Finance (JRJC)

Chinese financial information provider, China Finance Online (ticker: JRJC), announced it will re-purchase up to $10 million worth of its American Depositary Shares (ADSs) over a "period of six months". But think twice before you run out and buy stock on the news:

Here are details of the buyback:

  • JRJC is purchasing up to $10 million worth of ADSs.
  • As of February 28, 2005, the company had
    6,320,000 ADSs outstanding.
  • At yesterday's closing price of $6.08, this would be a buyback of 1.6 million shares or 26% of the outstanding ADS shares.

Sam Qian, President and CFO:

....We believe that China Finance Online's stock is undervalued in the
marketplace and as such represents a sound investment for the Company.  In
addition, we believe this repurchase represents China Finance Online's
commitment to its shareholders and serves as an indication of the fundamental
strength of the Company and its positive outlook for long-term growth.  We are
confident in the future of China Financial Online and believe this repurchase
program articulates our confidence while at the same time allows us to
maintain significant cash for strategic purposes.

Quick thought: Sounds like management is showing strong confidence in JRJC. But, notice that the company said nothing new about its near-term prospects. This should be cause for caution. For you may remember what the company had to say about its future prospects in a release back in February. See here.

JRJC's stock market performance:

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Tagged: , Internet Information Providers, China
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