Interactive Brokers Group: Another Company Fights Back

Sep.26.08 | About: Interactive Brokers (IBKR)

Good stuff we are starting to see out there: More and more companies are defending their stocks. One is Interactive Brokers Group (NASDAQ:IBKR) with both a nice pre-announcement to earnings and a potential share buyback of 8 million shares (they have 40M outstanding so it's up to 20% of their share count) Unfortunately it's the type of vague announcement I dislike:"we could buy back shares if we wish," with no timetable, and "we could discontinue it". I much prefer the Joy Global model (JOYG). But it's still good enough to move the stock up 14%. Since I am not that familiar with this stock, I am not jumping on board, but these seem to be very positive moves - even the earnings alone is a big upside.

Cash is King

  • Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), an automated global electronic market maker and broker, today announced preliminary financial estimates for the quarter to end on September 30, 2008 and further announced that its Board of Directors has approved a share buyback program by its subsidiary IBG LLC, authorizing IBG LLC to repurchase up to 8,000,000 shares of the company's common stock.
  • Based on the foregoing, the company expects income before income tax and minority interest to be between $325 million and $375 million and diluted earnings per share to be between $0.55 and $0.65 for the quarter to end on September 30, 2008. (analysts in at $0.47)
  • The company believes that the impact of the recent significant market events have unduly depressed the price of the company's common stock, and the company's Board of Directors has therefore determined that a program of stock repurchases would be an opportunistic use of available funds.
  • Thomas Peterffy, Chairman and Chief Executive Officer, said, "Our strong financial profile and cash position provide us with the opportunity to repurchase our stock to return value to shareholders. The repurchase program reinforces our belief in the long-term value of our stock, which is being negatively affected by the current credit market environment. IBG LLC has more than $4 billion of equity capital and does not rely on outside liquidity to any meaningful extent and is therefore relatively unaffected by recent events."
  • The repurchases will be funded with IBG LLC's existing cash and will be purchased from the open market and in private transactions if the company deems the price appropriate. The purchases may be made from time to time as market conditions warrant and subject to regulatory considerations. The timing and amounts of any purchases will be determined by the company's management. The share repurchase approval has no time limit and may be discontinued at any time. (I prefer: "We are going to run like a raging bull over the shorts and be done with this 8M shares within 6-9 months")

A lot of these commodity stocks have some nice cash flow and should really do the same. Hopefully they defend themselves in the next round of earnings reports.

Disclosure: No position