New York, Jan. 21, 2011 (GLOBE NEWSWIRE) -- With an improving economy and an increase in cash assets, many companies are expanding their stock buyback activity. While few expect an increase to the levels seen five years ago, there has been a steady growth in share repurchase in the past year.
In this exclusive LegalMinds/NASDAQ Securities & Capital Market Series interview, filmed at the NASDAQ MarketSite Broadcast Studio in Times Square, David Lynn and David Kaufman, partners at Morrison & Foerster LLP, discuss some of the considerations involved in a stock repurchase program - ranging from regulatory issues to the impact on shareholder value.
According to Lynn, Co-chair of the firm’s Public Companies and Securities Practice and former Chief Counsel of the Securities and Exchange Commission, "one of the first considerations is if I have a lot of cash on my balance sheet, my shareholders are often going to be pretty impatient about whether I can pull that cash into investments or acquisitions or other uses that are going to benefit the shareholders in the long run."
Though Lynn adds that there are also several downsides to share repurchase programs, including a potential downgrade if the company needs to go out and borrow the cash. He says it should also be considered whether it is the best use of it’s cash, which in addition to acquisitions or investments, could include offering dividends to investors.
Two other important considerations in a share repurchase program are the SEC’s anti-manipulation provisions and anti-fraud or insider trading regulations, which are discussed by Kaufman, ranked as one of America’s leading capital markets-derivatives and structured products attorneys by Chambers USA and Chambers Global.
In addition to restrictions under the 33 Act and the 34 Act, as well as current disclosure requirements, Kaufman also discusses the SEC’s proposal to modify what is known as Rule 10b-18, which is the rule that provides a safe harbor under which companies can execute stock repurchase programs.
Kaufman also advises clients to "step back and have a very fruitful and a constructive conversation" with their advisors - their broker-dealer, investment banking advisor, whomever - regarding just what type of share buyback, if any, they want to execute because there are quite a variety of characteristics and potential effects.
The interview can be viewed at http://legalminds.tv/nasdaq/lynn-kaufman-share-repurchase and will also soon be accessible on SocialStream@NASDAQ (http://social.nasdaqomx.com). In addition, the full-length interview will be published in the upcoming issue of LegalMinds™ digital magazine (www.legalmindsmagazine.com).
About Morrison & Foerster LLP
Morrison & Foerster is a global firm of exceptional credentials. Their clients include some of the largest financial institutions, investment banks, Fortune 100, technology and life science companies. They have been included on The American Lawyer’s A-List for seven straight years, and Fortune named them one of the "100 Best Companies to Work For." Their lawyers are committed to achieving innovative and business-minded results for their clients, while preserving the differences that make them stronger. Visit them at www.mofo.com.