What we have with Aurus is a huge credibility gap. If they were to announce, "We will be buying back 45M shares over the next year," who would believe them? The uncertainty of whether they were going to actually fulfill their pledge would continue month after month after month. That uncertainty would drive the pps down further and further.
On the other hand, if they were to announce, "We will be issuing a cash dividend to shareholders of record as of November 27 in the amount of $.001/share. The distribution will take place on December 15, 2009," the credibility gap would be filled.
Let's keep in mind that the idea of a cash divvy has come from the Company itself, after much consideration, and it is not even definite yet whether it will take place. From the business psychology point of view, if they are already headed in a direction to do something that will be of great benefit to shareholders, they should be encouraged to follow through. To say at this point, "Don't give us a cash dividend. Instead, you should take that money and buy back shares of the Company," would undermine our own credibility as business advisors.
Better to say, "The cash dividend is a great idea. It will restore the faith of the investment community in Aurus. We recommend that a cash dividend be distributed annually. Next, and in addition to the cash dividend, we would like to recommend a share buyback program whereby Aurus would purchase a percentage of its own shares at regular intervals. That policy would show the world that Company management wishes to increase shareholder value and has full faith that the enterprise will succeed in attaining its goals."
As the saying goes, don't change horses in mid-stream. If they are amenable to the idea of issuing a cash dividend because it makes sense to them, and if the funds are available, then they should go for it. That is a a stop-gap measure to stop the bleeding. Once that step is definitely agreed upon, we continue with the share buyback program: "Now, thinking long-term, please consider part two of our proposal."
