This morning an announcement from MusclePharm (OTCQB:MSLP) came over the wire announcing a $5M share repurchase program. Here is how the CEO describes it:
"We believe repurchasing our shares is a prudent use of our cash and believe this initiative is consistent with the goal of maximizing shareholder value," said Brad Pyatt, President and CEO. "The new share repurchase program demonstrates our continued confidence in MusclePharm's strategy to generate long-term profitable growth and strong cash flow, and reflects our commitment to delivering value to our shareholders."
Are you kidding me? I do not recall ever seeing a $70M market cap bulletin board company do this. Here is a firm supposedly in its early growth phase and management apparently believes that there are no better uses for the money than buying back shares. How about signing up more celebrity endorsers? How about bringing powder manufacturing in-house? How about an advertising campaign? How about extending its sponsorships (cross-fit championships, extreme sports, triathlons, etc.)? How about an acquisition?
How in the world can investors trust a company that does something like this? Folks, this is yet another example of why you should stay on the sidelines with one. The only reason that this buyback is taking place is to goose the share price for insiders so that some or most can exit profitably. Never a dull moment with this one....
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.