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Activision (ATVI) soars 17.9% following news it's buying back $5.8B in shares from Vivendi at...

Activision (ATVI) soars 17.9% following news it's buying back $5.8B in shares from Vivendi at $13.60 each (10% discount to last night's close). The deal is expected to boost EPS this year by 23-33%. CEO Bobby Kotick notes the mostly debt-financed purchase allows the company to take advantage of attractive financing while still retaining $3B of cash on hand. (PR)
Comments (6)
  • stoj
    , contributor
    Comments (233) | Send Message
     
    i sold acti last month, who would have known about this deal ?
    26 Jul 2013, 05:22 PM Reply Like
  • Clayton Rulli
    , contributor
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    another example of how cheap interest rates are boosting the stock market
    26 Jul 2013, 11:30 PM Reply Like
  • c5966
    , contributor
    Comments (116) | Send Message
     
    I don't care how attractive financing is right now. I don't think borrowing is a good idea to pay for a share buyback. It's too much like robbing Peter to pay Paul.

     

    I would much rather a company buy back less shares, using some of the cash it already has on hand.

     

    Or, here's a thought: The company should use some of its free cash flow. After all, that's one of the uses of free cash flow - that and paying dividends and expansion.
    27 Jul 2013, 12:00 AM Reply Like
  • Financial Insights
    , contributor
    Comments (943) | Send Message
     
    Financing buybacks through debt is actually usually a good idea when interest rates are low. But it all depends on the cost of equity, the IRR of company projects etc. I am sure activision crunched the numbers and came to the conclusion that they could put their cash towards projects that have a higher rate of return then whatever their interest rate is on their financing.
    27 Jul 2013, 10:12 AM Reply Like
  • Dividend Monkey
    , contributor
    Comments (177) | Send Message
     
    This price jump doesn't make any sense.. if it gets around $20, this is a no brainer short
    27 Jul 2013, 10:41 AM Reply Like
  • c5966
    , contributor
    Comments (116) | Send Message
     
    I would probably agree with your supposition, if the company buys back their shares with debt, if those shares are undervalued.
    1 Aug 2013, 07:50 PM Reply Like
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