The9 Limited Fights Back

The9 Limited (NCTY), whose stock took a beating last Friday, is fighting back with a $50M share buyback announced Tuesday morning. The fight started with a Q3 $0.04 earnings miss on a $0.21 analyst estimate. The company does not provide forward guidance, and has recently been executing an expansion plan to keep up in the fast paced online game industry. The9 has about $277M in cash, so this could be just the first round. As of May 31, three insiders held about 53% of the company's shares. And as of September 30, the top 15 institutional holders held 27% of NCTY shares. That leaves 20%, of which the $50M share buyback could consume 8% at the Monday closing price of $20.17.

The9's revenue stream is primarily supported by the popular online game World of Warcraft, which it licenses from Blizzard Entertainment. Blizzard Entertainment is part of the French company Vivendi [VIV.PA] games group. This year Electronic Arts (ERTS) took a 15% stake in The9, with the prospects of releasing its casual soccer game EA Sports FIFA Online on The9's platform next year.

Disclosure: Author has a long position in NCTY