Why Signet Jewelers Stock Triumphed on Tuesday
Key Points
It has retained the services of a top investment bank in the effort.
The program should be fully completed within a matter of weeks.
Signet Jewelers (NYSE: SIG) saw its stock rise on an otherwise unexceptional Tuesday for the market. Investors bid up the price of the jewelry retail conglomerate by nearly 3% after it revealed plans for a new, $50 million share repurchase program.
A $50 million move
In a regulatory filing published late on Monday, Signet disclosed that it has retained white-shoe investment bank Goldman Sachs to enact a $50 million accelerated share repurchase (ASR) program. Under this initiative, Goldman is to deliver approximately 480,000 of these shares to Signet.
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The bank might be required to deliver additional shares after the completion of the agreement under certain circumstances, Signet wrote in the document. Under others, the specialty retailer could be obligated to make additional payments to Goldman Sachs.
The company added that the final settlement of the ASR agreement should occur between this Friday, June 12, and July 17.
Once this occurs, Signet will have roughly $355 million remaining in share buyback authorizations under a program initiated in 2017.
Double benefit
The goal of any significant share repurchase initiative is to retire a block of shares. When done well, this has the twin benefits of boosting a company's share price -- due to higher demand for the stock -- and lifting its earnings per share (EPS).
While I'm not particularly a fan of share buybacks, as I feel that precious capital can usually be deployed in more productive ways, this one is well within Signet's means (it had over $600 million in cash at the end of its latest-reported quarter) and the move is obviously resonating with investors. That said, I don't think anyone should transact in Signet purely on its repurchasing activities.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.