Synopsys Inc. SNPS recently announced that it is going to buy back $200 million worth of its common stock along with Wells Fargo Bank NA and HSBC under an accelerated share repurchase (ASR) program. This reflects the California-based company’s sound financial position and favorable prospects.
Per the deal, “Synopsys will receive an initial share delivery of approximately 3.5 million shares, with the remainder to be settled on or before Apr 29, 2016, upon completion of the repurchase.”
The number of shares to be repurchased will be calculated on the basis of Synopsys’ volume weighted average share price during the stated period, after adjusting for a discount.
This is not the first ASR program undertaken by Synopsys. The company had initiated a $180 million ASR program in Dec 2014 which was completed in the third quarter of fiscal 2015. Notably, the company had nearly $200 million remaining under its normal share repurchase program at the end of the quarter.
In August this year, the company announced another buy back worth $100 million under the ASR program. Again in September, Synopsys approved an extension of its existing share repurchase authorization to make it worth $500 million again.
Synopsys’ financial strength allows it to continue with its buyback program. As of Oct 31, 2015, the company’s cash, cash equivalents and short-term investments were $964.9 million. The company’s aggressive share repurchase policies are expected to boost investors’ confidence. Synopsys’ strategy to return wealth to shareholders reflects its growth potential and stable liquidity position.
Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. The company offers a full suite of products used in the logic synthesis and functional verification phases of chip design, including a broad array of reusable design building blocks. It also sells physical synthesis and physical design products, as well as physical verification products.
Other companies that have a consistent record of returning value through share repurchases and dividend payments are Yahoo! Inc. YHOO, SanDisk Corporation SNDK and Accenture plc ACN.
We believe that apart from enhancing shareholders’ return, these initiatives also raise the market value of the stock. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Synopsys remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks.
Currently, Synopsys has a Zacks Rank #3 (Hold).
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