Normally I would not consider the announcement of a stock buyback as worthy of an article, but with one of our holdings, China Medicine (OTCPK:CHME), there is an interesting back-story that warrants pointing out. In January, a private equity division of JP Morgan invested just under $70mm into common and preferred shares of China Medicine at $3 per share. The $2mm for the buyback will come from the escrow account which was funded by this investment. This means that JP Morgan explicitly authorized the buyback, which is significant because the stock is trading below the $3 at which they invested and they obviously think that the stock is too cheap at these levels.
We view the JP Morgan investment and their continued backing of the company as a huge positive. It was a very unique situation to see a private equity firm put so much money into a publicly traded small cap Chinese company and as such is a validation of the company and its prospects. We think that CHME will be able to get an up-listing to a major exchange and that along with the stock buyback should be a catalyst for a significant appreciation in the shares in the next several months.
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Disclosure: Author is long CHME