The Moelis Australia Ltd (ASX: MOE) share price dropped over 3% after announcing a share buy-back.
Moelis Australia is an Australian-based investment bank which has been operating since 2019. It offers asset management, corporate advisory and equities services. It has advised on over $100 billion of transactions, assisted clients to raise more than $7.5 billion and has over $3.9 billion in assets under management (AUM). Around 20% of Moelis Australia is owned by New York listed Moelis & Company (NYSE: MC).
Moelis Australia’s Large Share Buy-Back
Moelis has entered into a binding buyback agreement with Moelis & Company to purchase 8 million shares through a ‘selective’ buyback at $3.40 per share, which represents around 5.1% of the shares. This price is a 6.6% discount to the average share price over the past 30 days.
M&C has also sold 12.5 million shares of Moelis Australia at $3.40 to public investors and the Moelis Australia Employee Share Trust.
In addition to the buyback and sale, the trustee of one of the pre-IPO ownership trusts sold 3.35 million shares at $3.40 per share.
The buyback, costing around $27.2 million, will be funded by existing cash, which sits at $120 million. After all of these movements, Moelis staff will still hold around 35.5% of the business.
Why Is Moelis Doing This?
Moelis gave several reasons for these transactions.
There will be an approximate 26.7% increase in free float to help market liquidity on the ASX.
It is expected to add to profit/earnings per share (EPS) by approximately 5% on a full year basis.
Moelis Australia will cease to be regarded as a foreign corporation under Australian law which provides benefits of reduced costs, administrative burden and improved corporate flexibility.
And finally, it’s acquiring shares to satisfy prior and future staff share compensation awards at what management considers an attractive acquisition price.
There’s plenty of good reasons for doing this, and it makes sense to do it whilst the share price of Moelis has fallen almost 40% over the past year. But it does raise a question of whether M&C thinks now is a pretty good time to cash out of some of its shares, perhaps the Australian economy looks a bit too shaky?
Either way, if I had a choice of Moelis shares or the reliable shares in the free report below, I’d rather invest in the ones revealed in the report because they could be less cyclical.
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