Buyback Wednesdays – A Net-Net Biotech Announces A Large Buyback

With earnings season mostly behind us, buyback announcements also declined with a total of 18 companies announcing stock buybacks this week compared to 38 companies in the prior week. The top buyback is a nano-cap company with a market cap below $50 million that also happens to be a net-net. A net-net is a company where its market cap is less than current assets minus total liabilities.

Tonix Pharmaceuticals (TNXP) announced a $12.5 million buyback yesterday that represented more than a fourth of the company’s market cap at announcement. The company is a clinical-stage biotech that has one Phase 3 candidate for Fibromyalgia in its pipeline. The same drug will also enter Phase 2 trials as a potential treatment for Long COVID in Q2 2022. Beyond Fibromyalgia and Long COVID, the company also targets other central nervous system disorders and infectious diseases.

Tonix was recently granted a patent for its synthetic horsepox virus, which forms the basis for the company’s platform targeting monkeypox, smallpox and COVID-19. The stock is up more than 50% today as I write this, driven as much by the buyback announcement as the grant of this patent. This pre-revenue company is down more than 90% over the last year and burnt through more than $140 million in cash over the last four quarters. Despite this level of cash burn, the company has $140.4 million in cash on the balance sheet and only $15.8 million in liabilities. Considering the high level of cash burn, this stock buyback announcement is even more surprising than seeing home builders announce buybacks. Speaking of which, we have yet another home builder on our list with Taylor Morrison Home  (TMHC) announcing a $250 million buyback.

With oil prices heading up once again, energy companies like Laredo are generating significant cash flows and are returning those earnings to shareholders through buybacks. Another interesting share buyback announcement this week was by one of the nation’s largest baked goods company Flower Foods (FLO), the company behind brands like Nature’s Own, Dave’s Killer Bread and Wonder. The stock of this low growth, low margin business isn’t exactly cheap and the company has $697 million in net debt on the balance sheet after excluding capital leases. It might make more sense to use excess capital to reduce debt or grow through acquisitions.

Welcome to edition 9 of Buyback Wednesdays, a weekly series that tracks the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the largest buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap stocks with a market cap below $2 billion.

Only plus or premium subscribers can access this post. Subscribe today.