America’s Favorite Amusement Park Spends $2 Billion on Share Buybacks With Borrowed Money; Mostly at an Inflated PPS



Listed below is a complete timeline of Six Flag’s share buyback program. The purpose of this article is to better illustrate how counter intuitive and impractical it appears to be for a company to borrow money for the primary purpose of buying back its own stock in the open market, especially when this money is indirectly the product of an unprecedented increase in the size of the federal reserves balance sheet. At the time, the federal reserve was issuing trillions in the form of revolving loans, while also buying risky Mortgage Backed Securities from practically bankrupt financial services companies; something they had never done in the past. Most of the text is directly quoted from the company’s SEC filings.







(Reuters) — Six Flags emerges from bankruptcy








Followed by the acquisition








The loan






Then the backbacks








In February 2011, we initiated a stock repurchase program that permitted Holdings to repurchase up to $60 million in shares of Holdings’ common stock over a three-year period (the “First Stock Repurchase Plan”). Under the First Stock Repurchase Plan, during the twelve months ended December 31, 2011, Holdings repurchased an aggregate of 3,235,000 shares at a cumulative price of approximately $60.0 million. The small amount of remaining shares that were permitted to be repurchased under the First Stock Repurchase Plan were repurchased in January 2012.



On January 3, 2012, Holdings’ Board of Directors approved a new stock repurchase program that permitted Holdings to repurchase up to $250.0 million in shares of Holdings’ common stock over a four-year period (the “Second Stock Repurchase Plan”). During the twelve months ended December 31, 2012, Holdings repurchased an aggregate of 8,499,000 shares at a cumulative price of approximately $232.0 million under the Second Stock Repurchase Plan. As of January 4, 2013, Holdings had repurchased an additional 578,000 shares at a cumulative price of approximately $18.0 million and an average price per share of $31.16 to complete the permitted repurchases under the Second Stock Repurchase Plan.



On December 11, 2012, Holdings’ Board of Directors approved the Third Stock Repurchase Plan, which permitted Holdings to repurchase up to $500.0 million in shares of Holdings’ common stock over a three-year period. As of December 31, 2013, Holdings had repurchased 14,775,000 shares at a cumulative price of approximately $500.0 million and an average price per share of $33.84 to complete the permitted repurchases under the Third Stock Repurchase Plan. On November 20, 2013, Holdings’ Board of Directors approved the Fourth Stock Repurchase Plan, which permits Holdings to repurchase up to $500.0 million in shares of Holdings’ common stock. As of February 18, 2014, Holdings has repurchased 154,000 shares at a cumulative price of approximately $5.6 million and an average price per share of $36.10 under the Fourth Stock Repurchase Plan.



On December 21, 2012, we entered into an amendment to the 2011 Credit Facility (the “2012 Credit Facility Amendment”) that among other things, permitted us to (i) issue $800.0 million of senior unsecured notes (see 2021 Notes below), (ii) use $350.0 million of the proceeds of the senior unsecured notes to repay the $72.2 million that was outstanding under the Term Loan A and $277.8 million of the outstanding balance of the Term Loan B, (iii) use the remaining $450.0 million of proceeds for share repurchases and other corporate matters and (iv) reduce the interest rate payable on the Term Loan B by 25 basis points.





On November 20, 2013, Holdings’ Board of Directors approved a new stock repurchase program that permits Holdings to repurchase up to $500.0 million in shares of Holdings’ common stock (the “Fourth Stock Repurchase Plan”). As of February 14, 2014, Holdings has repurchased 154,000 shares at a cumulative price of approximately $5.6 million and an average price per share of $36.10 under the Fourth Stock Repurchase Plan.



On June 30, 2015, we entered into the Amended and Restated Credit Facility, which is comprised of the $250.0 million Amended and Restated Revolving Loan and the $700.0 million Amended and Restated Term Loan B. In connection with entering into the Amended and Restated Credit Facility, we repaid the outstanding Term Loan B. The remaining proceeds from the Amended and Restated Credit Facility were primarily used for share repurchases.



Then comes the insider sales















On June 7, 2016, Holdings announced that its Board of Directors approved a new stock repurchase program that permitted Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the “June 2016 Stock Repurchase Plan”). Holdings fully utilized the availability under the June 2016 Stock Repurchase Plan by May 2017. Throughout the program, Holdings repurchased 8,392,000 shares at a cumulative cost of approximately $500.0 million and an average price per share of $59.58.





On March 30, 2017, Holdings announced that its Board of Directors approved a new stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the “March 2017 Stock Repurchase Plan”). As of February 14, 2019, Holdings had repurchased 4,603,000 shares at a cumulative cost of approximately $268.2 million and an average price per share of $58.27 under the March 2017 Stock Repurchase Plan, leaving approximately $231.8 million available for permitted repurchases.










On April 18, 2018, we completed an upsize to our Amended and Restated Term Loan B. The upsize increased our Amended and Restated Term Loan B borrowings by $39.0 million. The proceeds of the additional borrowing will be used for general corporate purposes, including share repurchases.







It almost looks like the director just took the money from the loan and used it to buy stock from his hedge fund…It’s really just that simple. What’s worse is that this was essentially freshly printed money from the fed — credit meant to stimulate the economy.


Is there an equation we are all missing here? In the aggregate, if every company in America were to borrow money at artificially cheap interest rates so they could buy back their own stock, the result would just be fewer people owning a share of the stock market, which would only act to further exacerbate an already alarming gap between the rich and poor in the United States.

It just seems sort of odd that so many companies are choosing to do this when they could, you know, maybe build something instead. Isn’t that what companies are supposed to do with credit? Again, this isn’t rocket science.



What we do know is that they wouldn’t be buying back all this stock if they were paying interest at the rate they were being charged in 2002 — that is for sure. If this hedge fund had even attempted to suggest that the company buy back stock from him and his fund with money that they had just borrowed from a bank, the other directors probably would’ve laughed in his face and thought he was joking. This was when they still used the term “book-value”, a valuation metric that feels almost archaic today.



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