Investors Unimpressed by American Oriental Bioengineering Buyback Announcement

American Oriental Bioengineering, Inc. (NYSE: AOB) announced plans to offer $85 million in Convertible Senior Notes, due 2015.

At the same time, the company has entered into an agreement to use $30 million of the proceeds to buy back shares of its own stock, in part to counteract a decline in price of its shares caused by the announcement and its subsequent dilution of existing shares.

The remainder of the proceeds will be used for general corporate purposes.

The company reported cash of $159 million at the end of Q1, equivalent to $2.03 per share. American Oriental has $174 million of revenue in the most recently reported 12 months, on which its net earnings totaled $46 million.

Investors were not impressed by the stock buyback portion of the announcement. American Oriental fell 49 cents to $8.49 during the regular session Monday. Then, after the Note Offering was announced, its shares fell another 25 cents to $8.20 in the aftermarket. In the last 12 months, American Oriental has traded in a range from $14.48 and $6.83.

Disclosure: none.