STAAR Surgical (STAA) announced a large-scale stock buyback plan after the close on Thursday, and investors responded enthusiastically by buying the stock, driving its share price up more than 7% at Friday’s close. The eye care specialist said its board of directors has authorized the repurchase of up to $50 million of its common stock.
According to the announcement, STAAR Surgical will repurchase its own shares in the open market from time to time through a variety of methods, including block trades and structured agreements with third parties. The company is not obligated to repurchase a specific number of shares at any time, and the plan may also be modified or suspended at its own discretion. In addition, the buyback plan has no fixed end date, but the company expects it to last for about a year.
In the press release promoting the move, STAAR Surgical quoted Chief Executive Officer Warren Foust as saying that the plan “reflects the board’s and management team’s confidence in STAAR’s business progress, as well as the company’s strong balance sheet and ample free cash flow.” Foust also added: “It also reflects our judgment that STAAR is currently significantly undervalued, and we intend to repurchase shares while this dislocation exists.”
STAAR Surgical’s recent fundamental performance supports the buyback. In the second quarter, the company’s net sales more than doubled year over year, mainly driven by growth in China, its largest market. The company also achieved net income on a book basis and had a cash position of nearly $149 million.
Although some argue that stock buybacks are not the wisest way for a company to use valuable financial resources, for a company focused on a niche area like STAAR, a buyback helps attract market attention to the stock and support its share price. The market’s bullish reaction to the news is reasonable.
By announcing a $50 million stock buyback plan, STAAR Surgical conveyed to the market management’s confidence in the company’s business progress and financial condition. Against the backdrop of a sharp increase in second-quarter net sales and ample cash reserves, this move not only reflects the company’s judgment that its share price is undervalued, but also effectively boosted investor sentiment in the short term and drove a significant rise in the stock price. Although buybacks are not a universal strategy suitable for all companies, for a niche market company like STAAR Surgical, this buyback is reasonable and positive in attracting attention and supporting the share price.
