Red Hat In The Midst Of A $300 Million Stock Buyback

Open-source software company Red Hat has announced earlier this week that they are going through a $300 million stock buyback program in common stock.  This new plan replaces the previous $300 million buyback program with the final $179 million completed since February 28, 2013 at an average price of $49.15 per share.  The new stock buyback program will allow management to use their discretion to buy Red Hat stock from time-to-time assuming that the market conditions are favorable until the $300 million allocation is completed.

“Over the last 13 months  we have repurchased $300 million or 5.9 million shares of Red Hat common stock under the current program, equivalent to 3% of our shares outstanding as of February 28, 2013,” stated Red Hat EVP and chief financial officer Charlie Peters. “Our management team and Board of Directors have a strong conviction in our long-term growth prospects and our ability to generate profits and cash flow. We believe that stock repurchases demonstrate our commitment to building shareholder value as well as confidence in achieving long-term growth.”

In the previous program, Red Hat was allowed to repurchase around 3% of their outstanding stock.  The $300 million allocation is around 23% of the company’s current cash stock of $1.3 billion. Buying back stock is a way for companies to get rid of excess cash and increasing their stock price while securing additional shares for the future as a way to get out employee stock grants or for a secondary stock offering.

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