The buyback and the dividend are both luxuries that CLF can hardly afford. Their cashflow is limited and they made such a big deal by cutting their capital spending.
I don't get it. They're $3.3 billion in debt at this point coupled with an uncertain revenue picture and managements first move is to buy back $200 million in stock?
It would be more impressive if Casablanca had that kind of faith they'd be the ones buying $200m in stock.
In general I support the idea of having a buyback plan on the books. However, in my opinion, a share buyback plan that is on the books should only be executed if 1) there are excess funds than cannot be profitably reinvested in the company and 2) the current stock price is at a large discount to a conservative estimate of the business value. Otherwise, the buyback will have a short-term effect when the company's revenues eventually are shown to be stagnant.
In CLF's case, seeking growth is not the theme-of-the-day. So, company cash might not be needed for reinvestment in the company... and, the interest rates are low, which removes much of the incentive for a stagnant cash hoard.... However, I'm not convinced that the stock price is under-estimating the intrinsic business value for CLF... My doubts rise from the large short position which argues that many sophisticated investors believe that the stock price is still too high (not my opinion, but a signal that my opinion should not be given much credit). Thus, at this time, I would prefer that CLF does not execute a stock buyback plan.
It is unlikely that CLF stock will be at a large discount to its business value when Casablanca exits. Thus, in my opinion, if the buyback plan is used to purchase Casablanca's shares, it would not be good for CLF's other shareholders.
Market Data 
Markets 
AI
