Last Friday Argo Group announced that is successfully completed the share repurchase program that was started on the 30th of March. In just three months time the company spend £1.96 million repurchasing 19.0 million shares (28.1% of the outstanding shares) which is pretty impressive considering that insiders owned 33.2% of the share capital and on the AIM market average daily volume is around 60 thousand shares a day. Apparently there was plenty of liquidity off-exchange using block trades.
I have mixed feelings about the successful share repurchase program. It’s good that they managed to buy a large amount of shares at a nice discount to NCAV which is nicely accretive to intrinsic value. At the same time I’m worried that the management team didn’t do this share repurchase program to create value, but to solidify their control of the company. Thanks to the repurchase program their ownership went from 33.2% to 51.2% without paying any control premium to minority shareholders. I don’t really like this, and that is why urged people earlier this year to vote against the share buyback proposal. Unfortunately the vote passed, and I now have to accept that I’m even more at the mercy of the whims of the Rialas brothers than before.
Author is long Argo Group