Rex American Resources (NYSE:REX) is an ethanol company and an asset play that I have written articles about frequently. One key aspect to the story is its substantial corporate cash horde (about $8/share, or over half its market cap) and the potential stock buybacks the company could undertake. This year, REX has been rather quiet with only $7 million in stock repurchased in the first three quarters, but I expect another $3 million or so in fourth quarter and at least $10 million next year.
Recently, however, even one of Rex's subsidiaries is even starting to buy back shares from unit holders. According to SEC filings, One Earth Energy, Rex's biggest and most important subsidiary, is making a tender offer to some of its smallest shareholders. While the point of the transaction is to allow One Earth to "go private" (stop filing periodic SEC documents), which would save the company $205,000 a year, it has the effect of modestly increasing ownership for the other shareholders. One Earth expects to pay $1.1 million to retire up to 200 units. This action will mean Rex's ownership interest in the plant will effectively increase to 74.75% from its current 73.67%.
While this is not significantly meaningful, it highlights how strong some of the underlying subsidiaries have been for REX and that they are building up cash themselves that can be used to pay down debt or return to shareholders (including REX). Given the market seems to be valuing these businesses at significantly below liquidation value ($8/share in cash, $5/share in real estate and tax credits leaves $3/share for over 200 million gallons of ethanol production), it's reassuring to see cash flow being generated and put to good use.