Time for Another Amazon Share Repurchase

I thought it would be interesting to check on the progress of Amazon's (AMZN) (frequently hyped) Stock Repurchase Program(s).

In August 2006, the Board of Directors authorized a 24-month program to repurchase up to an aggregate of $500 million of Amazon common stock from which they repurchased 8.2 million shares for $252 million in 2006 and 6.3 million shares for $248 million in Q1 2007.

This turned out to be quite profitable for Amazon, yielding a gain of over $635 million at today's share price of $78.31. Not bad, considering the firm only made $846 million in the last 18 months E-tailing.

So what about the subsequent stock repurchase plans, announced, with great fanfare?

On April 24, 2007, the Board of Directors authorized a new 24-month program to repurchase up to an additional $500 million of common stock. The share price closed at $44.75 on the day of this announcement and opened the following day at $53.12. Amazon has repurchased no shares under that new program -- not one.

However, before that program had expired, Amazon announced an even bigger, new share repurchase program. On February 8, 2008 the Company announced that its board had authorized the Company to repurchase up to $1 billion of the Company's common stock within the following 24 months. This stock repurchase authorization replaced an April 2007 $500 million stock repurchase authorization. The share price on that date was $73.50. Again -- not a single share was repurchased.

It appears to me that Amazon likes to announce these plans but hasn't taken any action since the stock price passed $50 in the second quarter of 2007. In early March 2008, the shares were trading in the low $60s, yet Amazon took no action.

My conclusion is this -- Amazon management doesn't believe its shares are undervalued above $50.

[8/28/2006] Amazon.com, Inc. (the "Company") announced today that its Board of Directors authorized the Company to repurchase up to $500 million of the Company's common stock within the next 24 months, through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions or a combination of the foregoing. The program allows the Company to opportunistically repurchase its shares. The Company may do so if it believes its shares are undervalued. [$28.91]

[4/24/2007] Additionally, the Company's Board of Directors has authorized the Company to repurchase up to $500 million of the Company's common stock within the next 24 months, through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions or a combination of the foregoing. The program allows the Company to opportunistically repurchase its shares. The Company may do so if it believes its shares are undervalued. [$44.75]

[2/8/2008] The Company also announced today that its Board of Directors has authorized the Company to repurchase up to $1 billion of the Company's common stock within the next 24 months, through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions or a combination of the foregoing. The program allows the Company to opportunistically repurchase its shares when it believes that doing so would enhance long-term shareholder value. This stock repurchase authorization replaces an April 2007 $500 million stock repurchase authorization. [$73.50] 

Disclosure: Author has a short position in AMZN

Comments

[deaverb:]

Logical.

2008 Jul 29 09:24 AM