NEW YORK – TCI Intl. said Monday it would buy back as much as 5% of its own stock in a program that would cost about $80 million at the company’s current stock price.
But the move immediately raised questions about TCI Intl.’s strategy, as it would use up about half of the cash the company now has on its balance sheet. It raised that money in a $345 million convertible bond issue last year that was meant to be for investments in overseas cable businesses.
TCI Intl. chief financial officer Graham Hollis said the company had about $170 million cash on hand and that was enough, “certainly in the short term,” to finance the company’s businesses and do the buyback. “We think that the stock is very undervalued,” Hollis said.
Like its 81% parent TCI, the stock has fallen from a high of $24.75 this time last year to its price before Monday’s buyback announcement of $14.12, although it rose 87¢ on the news to close at $15. While that is down sharply from its year high however, the stock has come back from its low for the year reached last month of $12.50. The company plans to buy back as many as 5.3 million shares.
The bulk of TCI Intl.’s assets are in three areas: shareholdings in Telewest and Flextech in Britain, an Argentina cable operator and a Japanese startup cable business. Hollis said the Japanese startup was the only business that drew funds from TCI Intl. and its capital needs were between $50 million-$100 million a year.
But Wall Streeters questioned the company’s strategy. One analyst, who did not want to be named, said the stock fell after the convertible debt offering last year and it was surprising that the company would now use the money raised from the offering to buy back the cheaper stock.
He added that Wall Street was disappointed at TCI Intl.’s progress in building up its Japanese business.
One byproduct of the buyback is that it will increase TCI’s shareholding, because the cabler won’t participate, Hollis confirmed.