Frontrunning A Whale

I am not going to restate the entire case for Vodafone as David Einhorn has done a better job than I could hope to do. In short, Vodafone is not being given credit for its 45% stake in Verizon Wireless. If they trade in line with the valuation of their peers the stock should have greater than 50% upside.

The case for Vodafone has been valid for a long time but what has changed is that there now is a catalyst for the shares to go higher. Vodadfone announced the details of their greater than $6 billion share repurchase plan. They have structured it similarly to an accelerated repurchase plan in that they cannot back out, and will complete the plan by the end of the year. From Vodafone:
On 17 June 2011 Vodafone gave irrevocable instructions to Deutsche Bank AG London ... to purchase Vodafone shares on Vodafone's behalf during the period from 20 June 2011 until 30 December 2011 (the "Period").   The purchase of shares in the Period pursuant to the irrevocable instructions and the £4bn share buyback programme will be executed at all times ...

Using average volume and the current price this would mean that they will be buying well over 15% of the daily volume of the stock on the LSE between now and year end in order to complete the repurchase.

 

Please note: A correction to this post has been posted

1 comment:

Matthew Greenfield said...

It seems odd that a company of this size could be under-followed, but VOD somehow falls between the cracks, perhaps because it is multinational and because it is both an OECD and an emerging market play.