Golden Entertainment, known for managing The Strat casino hotel near the Las Vegas Strip, recently unveiled an expansion of their share buyback initiative. As part of their third quarter financial results release, management decided to add $100 million more towards purchasing shares; raising total funds dedicated towards buyback to $131.4 million.
Blake Sartini, CEO of Golden Entertainment, expressed confidence about its future prospects. With our increased share buyback authorization now exceeding $130 million, he stated. Golden plans on using its liquidity to reacquire itself through regular buyback programs throughout 2018.
Commitment to Share Repurchase Efforts
Share repurchase programs are becoming an increasingly popular corporate tool as companies look for tax-efficient methods of returning capital back to shareholders, while remaining flexible. While announcing such plans doesn’t bind a firm legally, Golden Entertainment has taken significant strides toward fulfilling its commitments of buying back shares at reduced values; an indication of belief in undervaluation.
“During the third quarter, we acquired 815,116 shares at an average cost of $31.65 each at an overall total cost of $25.8 million,” reported the company. Since October’s close of quarter, an additional 134613 were bought back at an additional cost of $4.2 million for total purchasing power totalling 1.944 million shares purchased during 2018 at an average price of $30.70 each for total reacquisition value totalling $59.5 million overall.”
As evidence of their aggressive buyback strategy is provided by their stock’s decline of 22.92% year-to-date; yet their average repurchase price this year just undercut the closing price of $30.78 by marginal amounts.
Financial Stability Fuels Shareholder Rewards
Golden Entertainment remains well positioned financially due to owning most of the real estate that supports their gaming operations. At the close of third quarter 2017, they held over $68.6 million in cash and equivalents with borrowing capacity reaching $240 million against outstanding liabilities totalling $399 million which may decrease due to lower interest rates boosting earnings potential.
Although speculation regarding Golden’s possible sale and leaseback of one of its land-based casinos has arisen, Golden has yet to publicly address them. Although such an acquisition might provide additional liquidity benefits to Golden, this transaction would also involve long-term rental commitments which might diminish shareholder returns over time.
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