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Lexmark buybacks at issue
Lexmark
International Inc. has bought back more than 31 million shares since
January 2005, reducing its outstanding share count to 100 million at
the end of September.A Goldman Sachs analyst asked company executives
during a recent conference call for their views on how the buybacks
might be affecting stock liquidity, a measure of how easy it is to buy
or sell a share without affecting the stock’s overall price.Liquidity
“really has to do with the extent to which the stock gets traded in the
market, and first of all how many shares are out there and how
frequently they turn over,” said University of Kentucky finance
professor Donald Mullineaux. “The concern becomes what’s called thinly
traded stocks, which means there’s not a whole lot of buying and
selling activity.”What happens with those thinly traded stocks is if
large orders come in one way or the other, it tends to move the price a
lot more.”That means prices could soar on good news or plummet on
bad.Lexmark’s chief financial officer John Gamble Jr. told analyst
Laura Conigliaro that “we don’t see an impact in liquidity and don’t
believe we’re in a situation where a lower share count is currently an
issue.””Obviously, if it started to become one, we would have to do
something about that,” Gamble said. “But at this point in time, we
don’t think there’s an issue.”Lexmark officials declined further
comment for this article, and Conigliaro was not available for comment,
a Goldman Sachs spokeswoman said.During the conference call, Gamble
said liquidity concerns would not prevent the company from continuing
to buy back shares, though he did not say whether the company would
indeed continue buybacks.The company has $600 million remaining on its
current share repurchase authority.With that, the company could buy
back close to 9 million more shares based on Friday’s closing price of
$66.82
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