SEC's buyback rules being followed
Those on this board who put forth that First Guardian's management has made "excuses" or "b.s'ed" us about the buyback procedure being slowed by low volume should read the CPA's guide to stock buybacks (pasted below) before spouting off. My reading of it shows me that FGFC has followed the letter of the law in obtaining 100 million shares in the past month. Those selling here out of panic that the price isn't skyrocketing faster and sooner (like likwit) are selling because of sky-is-falling illogic and self-fulfilling prophecies of negative momo.
If the company generates annual net income of 14 percent of $7 million, or $980,000, as stated, and the buyback sends the number of OS under 100 million, simple math shows that the net income per share (EPS) is going to be .01, giving us a PE of under 1.
GLTA fellow longs
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"SEC Rules
The company itself is covered by the SEC rules that prohibit insider trading in a public corporation’s stock. A corporation may not repurchase its own stock before any material inside information is reported to the public; a company should announce the decision to buy back stock before commencing actual purchases.
The SEC’s complex section 240.10b-18, referred to as Rule 10b-18, is generally regarded as the safe harbor for stock buybacks, although it does not provide absolute protection from litigation. Highlights of Rule 10b-18, which also provides various exceptions and traps, include the following:
Time. A corporation generally may not perform the opening trade on any day and may not trade during the 30 minutes before the market closes. The same restrictions apply to any affiliated purchasers, such as advisors involved in the decision to buy back stock.
Volume. During any one day, a corporation generally may not buy more stock than the larger of one round lot (generally 100 shares) or the number of round lots nearest to equaling 25% of the stock’s average daily trading volume for the four calendar weeks preceding the start of the buyback program.
Block purchases, which may be privately negotiated outside of the market, typically are not subject to the volume restriction if each block--
has a purchase price of at least $50,000 including at least 5,000 shares,
has a purchase price of at least $200,000, or
includes 2,000 shares (20 round lots) or more and is at least 150% of the stock’s average trading volume for the four calendar weeks preceding the buyback period.
Price. A corporation generally may not reacquire its stock with a purchase price or bid that exceeds the greater of the highest current independent bid quotation or the last independent sale price. Affiliated purchasers are bound to the same ceiling.
Broker or dealer. Only one broker or dealer may be employed on any one day to buy stock or make bids for the corporation and any affiliated purchasers.
Assume, for example, that X Corporation plans to repurchase shares of stock for employee benefit plans and that after the board of directors’ decision is announced, there is no material inside information. Before the buyback begins, X informs officers, employees, and directors of their responsibilities under insider trading rules. No individuals involved in X’s decision purchase any shares during the buyback period unless they coordinate their purchases with X. On Monday, X begins reacquiring shares through one broker, avoiding the opening trade and the last 30 minutes before the market closes. The top independent bid quote on Monday is $30. The last independent sales price is $29.50. None of the bid or settlement prices for shares that X buys exceed $30. X’s average daily trading volume for the last four weeks has been 120,000 shares. Monday’s market repurchases are limited to 300 round lots (25% of 120,000 shares), but one block purchase of 5,000 shares from a large shareholder is negotiated for a total cost of $147,500. On the basis of the facts, X’s buyback appears to comply with Rule 10b-18.
A smaller publicly held company’s legal department may lack the familiarity, time, or confidence to oversee occasional buybacks. Large brokerage firms have departments specializing in corporate stock repurchases. A corporation considering repurchases might interview several brokers and inquire about—
their Rule 10b-18 departments,
internal compliance systems and controls,
standard agreements with clients covering Rule 10b-18, and
indemnification of a client in the event that the broker violates SEC rules.
A corporation that regularly repurchases stock might rotate and monitor brokers to make sure that shares are consistently bought at good prices, a high level of service is delivered, and the CFO or other officers and directors have access to a depth of talent and expertise."
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