VeriSign Resolute On Buybacks Despite Warning Signs

from the double-down dept

The evolving credit crunch has forced some tech companies to to suspend plans to buyback their stock due to an inability to raise the necessary cash. Either way, you'd think that in light of current conditions, companies would be hesitant to leverage up by expanding their debt levels and removing some shares from the market. But current conditions don't seem to be much of a deterrent to some firms. VeriSign has announced the successful sale of $1.1 billion worth of convertible bonds with the proceeds earmarked for share repurchases. Although the move carries risk, Wall Street analysts tend to love this kind of move. One analyst lauded the announcement, claiming that VeriSign will now have a more "mature capital structure". The thinking is that VeriSign is a large company with slowing growth and so the quickest way to maximize returns is to take on debt and bet on itself. If the company executes well, then the move will look brilliant. But it leaves the company little to no margin for error should things not go exactly as planned.

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