Ten Network To Buy its Own Shares

Submitted by Craig Strzelecki on 4 July, 2008 - 17:18

The stockmarket value of Ten Network (TEN) share prices have nearly halved this year. Thus in order to savage the sagging share prices, it shall buy back up to 10 percent of its shares. Such a drastic move shall cost $150 million to the company as it plans to acquire up to 92.2 million of its own shares. The share prices witnessed a rally of 6 percent as soon as Ten began its debt-funded buy back plan.

Biggest shareholders have, however, declined to be a party to such a plan. Bruce Gordon's WIN Corp, along with 452 Capital and Argo Investments perceive the declining share prices as an unattractive selling proposition. According to them, they would not prefer to dump the shares but would rather wait for the share prices to rebound and sell them when the prices are more attractive. Yet another majority owner of Ten Network, CanWest, also declined to sell its stakes but tightened its grip more from 56 percent stakes to 62.6 percent.

According to Ten Executive Chairman, Nick Falloon, the proposed buy back of shares by the company shall lend long term value to its shareholders. Ten has witnessed a 10 percent fall in its operating profits after its share prices collapsed three weeks ago which finally triggered the buyback plan from the company.

A buyback plan from Ten Network comes as an unprecedented move from the company. A buy back is usually beneficial when the debt is cheaper than equity. Ten's current move defies the basic norms of a buyback and showcases weakening advertising market. The company is not awash with cash and such a step further downgrades its earnings. As per investors' point of view, the 10 percent buy back would make Ten Network Holdings even more illiquid that before. Certain funds would either be unavailable to invest in company with a limited free float.

WIN had recently increased its stakes in Ten to 13 percent and now plans to increase its holdings to 14.4 percent. If Ten's biggest shareholder refuses to budge, it would leave on 15 percent of its stake as free float. This would further question company's liquidity aspect in the minds of investors. Ten's share prices rallied 8.5 cents at the share market to reach day's high of $1.44 but eventually closed at an all time low of $1.355 on Tuesday.