by Marty Cook
Posted 12/3/2013 02:19 pm
Updated 3 months ago
Dutch auctions are more associated with online sales than with stock purchases, but P.A.M. Transportation Services Inc. hopes the auction helps it buy back 600,000 shares of its outstanding stock.
P.A.M., of Tontitown, announced Monday that it was holding a dutch auction to repurchase the shares for a price between $19 and $21. The stock (Nasdaq: PTSI) closed Monday at $19.98.
Allen West, P.A.M.’s chief financial officer, said the company has been trying to buy back outstanding shares for a long time and has purchased about 2.7 million shares since May 2005. There are 8.6 million shares outstanding, but the stock is so lightly traded that P.A.M. found it increasingly difficult to buy back any significant number of shares.
In November, P.A.M. shares traded at volumes of less than 10,000 frequently. Even at an average of 30,000 it would take weeks to accumulate the shares P.A.M. is looking to acquire.
"We tried to buy on the open market," West said. "No one was selling."
Setting an auction price of between $19-$21 will help stabilize the stock during the program, which is scheduled to run until Dec. 30. Shareholders who want to sell submit an offer of share number and share price to a third-party company running the auction.
If a shareholder wanted to sell 250,000 shares on the open market, selling them piecemeal over the course of days and weeks could put pressure on the stock and drive the price down. Buying in bulk helps P.A.M. acquire while helping investors sell their holdings.
"It will help investors get out, and get out at a profit," West said. "We haven’t heard of anyone who wants to get out. Helping someone get out is secondary. We’ve wanted to buy back shares because we think we’ve been undervalued for a long time."
Fewer outstanding shares makes them more valuable and increases the earnings per share.
West said P.A.M. doesn’t have any knowledge of the bids submitted because Computershare Trust Company is handling the auction. While the auction is open, P.A.M. is forbidden from buying shares on the open market.
"We’d like to get the full amount," West said. "We don’t have a feel for what the [bids] will look like."
West said the company’s board of directors decided on a target of 600,000 shares at a maximum cost of $12.6 million because that was the amount of cash the company could use without causing undue stress on operations. West said the board had previously authorized buying back 225,000 shares on the open market, which will have to wait until the conclusion of the dutch auction.