TKO Group Holdings, Inc. announced that it has entered into a stock repurchase agreement for $800 million of its outstanding Class A common stock.
The company will pay $800M to Morgan Stanley and expects delivery of 3.16M shares. TKO also announced under a 10b5-1 trading plan to repurchase up to $174M outstanding class A shares. This shall occur once the buybacks are complete.
The buybacks will be funded with money from the $1B first lien loan that was completed on September 15.
The release includes the following quote from Mark Shapiro.
“This plan to repurchase $1 billion in shares reflects our conviction in the business and the intrinsic value of our stock,” said Mark Shapiro, President and COO, TKO. “The repurchases, together with the recent 100% increase to our quarterly cash dividend program, reflect our continued commitment to a robust and sustainable capital return program. We remain focused on executing our balanced capital deployment strategy to deliver long-term value for our shareholders.”
Payout Perspective:
The general purpose of a stock buyback is to reduce the number of outstanding shares while increasing the proportion of earning that each share is worth. Thus, in general, the earnings per share increases while the price to earning decreases. The stock price is currently trading around an all-time high ($200.00 per share). This would also show investors that the business is flush with cash and is financially stable.
It also is controversial because its often a way to reward employees and executives with stock and options. A company can buyback shares and issue them to employees and management.
As an example, there is this:
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