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Rambus Boosts Shareholders’ Return With $50M ASR Program


Rambus, Inc. RMBS recently announced that it is set to buy back $50 million worth of its common stocks under an accelerated share repurchase (“ASR”) program. The initiative reflects the company’s on-going efforts to enhance shareholder value.

The company yesterday announced an agreement with Citibank N.A. in this connection. Per the agreement, Rambus will initially receive approximately 3.1 million shares within the first week of the initiation of the program, while the remaining shares will be received within the next six months. The number of shares to be repurchased will be calculated on the basis of Rambus’ volume weighted average share price during the stated period, after adjusting for a discount, that has been decided on.

Notably, this ASR program is part of the broader repurchase program that was authorized by its Board of Directors on Jan 21, 2015. The board had approved the buyback of around 20 million shares, with no terminal date till which the authorization would be valid.

Notably, in the second quarter of fiscal 2017 Rambus went into a similar ASR program which was completed in the fourth quarter and the total number of shares received was around 4 million. This brought the cumulative shares bought back till Dec 31, 2017 to around 12.6 million since the beginning of the program.

Prior to the announcement of the ongoing ASR, there was an outstanding authorization of buying back around 7.4 million shares of the company’s common stock.

Rambus’ financial strength enables it to continue with its buyback program. At the end of fiscal 2017, the company’s cash, cash equivalents and marketable securities were $329.4 million. Its share repurchase policies are anticipated to boost investors’ confidence which will eventually help the stock rebound.

Notably, in a year, the stock has underperformed the industry to which it belongs to. Rambus has returned 1.3%, while the industry grew 9.5%.

We believe that apart from enhancing shareholders’ return, these initiatives also raise the market value of the stock. Through share repurchases and dividend payouts, companies boost investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Rambus remains confident of its growth potential, consequently raising hopes for a further hike in shareholder value through dividend payouts and share buybacks.

Zacks Rank and Stocks to Consider

Rambus carries a Zacks Rank #3 (Hold).

Some of the better-ranked stocks in the technology sector are Mellanox Technologies, Ltd. MLNX, NVIDIA Corporation NVDA and Paycom Software, Inc. PAYC all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rate for Mellanox Technologies, NVIDIA and Paycom is projected to be 15%, 10.25% and 25.75% respectively.

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