Rambus Inc. (RMBS), the patent licensing company run by CEO Ron Black, on Monday announced it has initiated an accelerated share repurchase program with Citibank N.A. to repurchase an aggregate of approximately $100 million of its common stock, with an initial delivery of approximately 7,812,500 shares.
The repurchase program was announced a week after the Sunnyvale, Calif.-based company reported lower than expected third quarter earnings and forecasted lower than expected fourth quarter earnings as well.
Shares of Rambus tumbled 28% on Tuesday, Oct. 20 a day after the company said its third quarter net income of $182 million, or $1.52 a share on a fully diluted basis, driven by a $174 million tax benefit from the release of a deferred tax asset valuation allowance. The earnings compared with net income of $5.5 million, or 5 cents a share on a fully diluted basis, in the year ago quarter. Revenue rose 6% to $73.8 million from $69.7 million; the average analyst estimate was $76 million. Rambus also said it expects fourth quarter revenue of $71 million to $77 million. Analysts were expecting $83.4 million.
Shares of Rambus, which closed at $10 on Oct. 20, are down 23 cents to $10.30 today in trading. They have traded between $9.86 and $15.49 over the past year.
“This share repurchase program showcases the confidence we have in our strategic programs and the growth we believe they will ultimately create,” Black said in an Oct. 26 statement announcing the program. “We believe this buy-back program highlights our ability to continue the investment in critical technology areas while delivering shareholder value.”
Under the accelerated share repurchase program, Rambus will pre-pay to Citibank the $100 million purchase price for common stock and, in turn, Rambus will receive an initial delivery of approximately 7,812,500 shares of its common stock from Citibankwithin the first week of the program.
Rambus said the number of shares to be purchased will be determined based on the volume weighted average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties. The program is expected to be completed by June 2016.
The accelerated share repurchase program is part of the broader share repurchase program previously authorized by the Rambus board. As of October 26, 2015, before giving effect to the transaction under the accelerated share repurchase program, there remained an outstanding authorization under the broader share repurchase program to repurchase approximately 20 million shares of the outstanding common stock.
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