Cactus Plans to Pump $150 Million Into a Share Repurchase – Buyback Wednesdays

Last week, footwear retailer Designer Brands Inc. (DBI), decided to buyback share through a Dutch auction offer of $100 million representing 25% of its class A shares outstanding. The company, with a market cap of $605 million and an enterprise value of $1.77 billion, announced its intention to repurchase shares in a price range of $7.00 to $8.00 per share. The stock immediately ran up more than 40% in a week following this announcement and currently trades at $9.52 per share.

Dutch auctions are infrequent but intriguing. This offer also includes an odd lot provision where the company will acquire odd lots of less than 100 shares. Given the low share price and the fact that the stock is trading well above the range provided, there isn’t an option to participate in the odd lot tender. I have owned DBI in the past and was in one of their stores a couple of weeks ago, so I was initially intrigued when I saw this announcement. However after looking at the company’s balance sheet, revenue growth rate (or lack thereof) and net margin, I decided to instead focus on an oil services company called Cactus this week.

Key Insights:

• Cactus, Inc. (WHD) designs, manufactures and sells wellhead and pressure control equipment to major oil operators.
• In addition to operating service centers across North America and Australia, it serves a few international markets.
• Cactus’ stock price tends to fluctuate with the overall oil and gas market due to the cyclical nature of its business.

Source: Cactus Investor Presentation – May 2023

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