VST Stock: Why It Substantially Increased Today

By Amit Chowdhry ● Oct 13, 2021
  • The stock price of Vistra Corp (NYSE: VST) increased by over 11% today. This is why it happened.

The stock price of Vistra Corp (NYSE: VST) increased by over 11% today. Investors are responding positively to the company announcing a new $2 billion share repurchase program and the pricing of a private offering 1 million shares of its 8% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock to qualified institutional buyers at an offering price of $1,000 per share. The company will receive gross proceeds of $1 billion from the sale of the Preferred Stock before deducting the initial purchaser discount and other estimated offering expenses. The offering is expected to close on Oct. 15, 2021, subject to customary closing conditions.

As an initial step in its broader capital allocation plan, the company plans to use the net proceeds from the offering to repurchase its common stock beginning as early as early November 2021. And Vistra’s Board of Directors has adopted a new $2 billion share repurchase program, effective immediately (superseding its prior $1.5 billion repurchase program, which had approximately $1.325 billion of remaining authorization). The company plans to execute the share repurchases under this new program from November 2021 to the end of December 2022. The timing and amount of share repurchases will be announced publicly each quarter in arrears, consistent with Vistra’s historical practice.

The share repurchase program announced today is aligned with the company’s previously announced strategic and capital allocation review seeking to enhance shareholder returns. And Vistra’s strategic review has identified and prioritized four key strategic imperatives, including:

1.) Vistra management believes the pairing of its low-cost, efficient, and diversified generation fleet, including its burgeoning zero-carbon business, with its customer-centric retail platform and strong commercial capabilities is the optimal way to create value for its shareholders in the dynamic and competitive markets where the company operates.

2.) Vistra plans to use a significant portion of its free cash flow to repurchase its shares and expects it will continue to pay a meaningful dividend on its common stock. And the announcement advances one of Vistra’s core capital allocation priorities by using lower-cost capital to accelerate the company’s ability to repurchase its severely discounted shares. The repurchases will reduce the total number of shares outstanding, which over time should accrue value to Vistra’s remaining shareholders.

3.) Vistra expects it will continue to pay down debt over time in order to maintain a strong balance sheet, allowing them to manage commodity and climate change risk, and positioning it to prudently pursue opportunistic growth. By year-end 2022, the company is expecting to reduce a meaningful portion of the $2 billion in increased debt resulting from the impacts of Winter Storm Uri.

4.) Vistra plans to participate in the electric industry transition utilizing its strong capabilities, attractive and significant pipeline of zero-carbon projects, and access to low-cost capital.

Vistra’s announcement today of this share repurchase program is the first step in launching the details of the company’s strategic review.

KEY QUOTE:

“Today, Vistra took an important first step in executing on the output of its strategic review by taking advantage of the unprecedented and unsustainable differences in the cost of capital implied in its equity value as compared to other forms of capital, such as debt and preferred stock. This announcement underscores our confidence in the business and commitment to enhancing shareholder value while maintaining our strong balance sheet. The strategic imperatives announced today are a result of a months-long strategic review by the Company, including our Board – positioning Vistra to deliver strong, consistent long-term earnings into the future, while investing in our attractive retail and zero-carbon businesses and returning a significant amount of our free cash flow to shareholders on an annual basis. We believe in the value of this company and will continue to take actions to rectify the significant undervaluation of our stock.”

— Curt Morgan, Vistra’s chief executive officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.