Anaheim-based Datum and Far West Financial, a Newport Beach savings and loan holding company, have joined a dozen other Orange County companies in plans to buy back their own stock as market prices continue to sink.
Louis B. Horwitz, Datum president, said Wednesday that directors believe that "at recent price levels . . . the purchase of outstanding shares constitutes an attractive use of available capital resources." Horwitz said his board did not limit the buyback and left the purchases to the discretion of company management.
Datum, which makes computer subsystems, has 2.8 million common shares outstanding. As recently as Oct. 2, Datum stock sold for $5.62 per share. It slipped to $5 per share Oct. 19--Black Monday, when the Dow Jones Industrial Average dropped 508 points--and closed Wednesday at $3.125, down 12 1/2 cents a share for the day.
The board of directors of Far West Financial voted this week to authorize the repurchase of up to a million shares of the company's outstanding common stock "because the stock appears undervalued in the market, compared with the company's earnings and shareholders' equity," according to a statement prepared by company officials.
Charles H. Green, Far West's senior executive vice president, said Wednesday that the company also set no limit on the price it will pay for the stock and has no timetable for the repurchase.
Far West is a savings and loan holding company with 8.3 million shares outstanding. Its stock, which was selling for $14 a share on Oct. 2, dropped to $7 on Black Monday and closed Wednesday at $8.125, down 12 1/2 cents.
One of the main reasons that companies buy back outstanding shares of their own common stock when prices have been deflated is that the stock is "perceived as a good value," said Richard Stasand, an analyst and partner in the Newport Beach investment banking firm of Diehl & Co.
He said a buyback also "eliminates float, the number of shares outstanding in the public's hands," which is desireable because by shrinking the number of publicly held shares, a buyback improves earnings on a per-share basis.
Shareholders of firms that are busily buying back stock should take it as "a vote of confidence that the company is willing to come in here and buy their own shares back," Stasand said.
Of the companies that previously had announced buyback plans, Safeguard Health Enterprises of Anaheim has repurchased 250,000 to 300,000 shares of outstanding stock, paying $6 to $6.50 per share, according to W. Bruce Steever, the company's chief financial officer. Safeguard stock was trading at $7.50 on Oct. 2, dropped to $5.75 on Black Monday and closed at $6 Wednesday, unchanged from Tuesday's close.
Additionally, Cimco, a Costa Mesa-based custom injection-molding company, said Wednesday that it has bought back an "unspecified" amount of its stock since Oct. 19. And on Oct 20, AFG Industries, an Irvine-based manufacturer of flat-glass products, had already repurchased about 250,000 outstanding shares of its common stock.
The other Orange County companies that have begun buyback programs are Archive of Costa Mesa; Carl Karcher Enterprises of Anaheim; EECO of Santa Ana; Eldorado Bancorp, Tustin; Fidelity National Financial and Gradco Systems, both of Irvine; Pacific Healthcare Systems of Cypress; Silicon Systems, Tustin, and Western Digital of Irvine.