The Rules on Buybacks

Cramer gives companies that want to do buybacks some advice. And please, no more Dutch tenders.
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Could yesterday's

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Dutch tender be the beginning of some wave of management backlash against the low share prices they suffer at a time of record


prices? And if it is, let me just say one thing: It is a darn stupid idea.

Dutch tenders, these ridiculous partial tenders set at various prices, are a nightmare. They force shareholders into a series of difficult calculations about what they should and should not do. I have done dozens of them and each time they have not been worth the effort. They are despised by shareholders, despite what the corporate treasurers might say. They make everybody feel stupid. And they are obviously done with some sort of wrong-headed counseling from some investment bank that doesn't have a clue of how stocks trade and the market works.

Don't get me wrong. I am a huge, huge fan of real stock buybacks. They make sense. They stabilize the market, something that helps tremendously when volatility can rock the market instantaneously. They show great conviction. And when done right they are a thousand times more intelligent and worthwhile than a Dutch tender.

Yet, most companies don't have a clue about how to run a buyback. So, I will tell them. Here is what you do.

First of all, you name the buyback manager when you announce the buyback. You don't give it to some buddy or hand it off to a board member's kid's brother. You give it to a great institutional desk that has a pro managing buybacks.

You then be there everyday, as certain as


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. You make sure that the buyback is visible and active. If you announce a buyback and then you are not there, we think you are a joker and a charlatan. If you are there intermittently, forget it; that doesn't cut it either. Consistency is everything in the buyback.

Give the broker something to work. Tell him he has 100,000 shares to buy if your stock trades a million shares a day. Make sure that the order is re-entered everyday. Don't let counsel buffalo you. There are only a couple of off-limits days to buybacks. Most of the companies I deal with are there everyday except right before and during earnings.

If you are a listed company, clue the specialist in about who has the buyback. And if someone wants to move a block of stock, don't hem and haw and try to figure out if it is right. Don't play the market. Your buyback was authorized because you thought your stock was too cheap. Don't then show the market that it is only 10,000 shares too cheap. Get your hands dirty and buy some stock.

Need help? Well, who trades most of your stock? Which firm has the ax? Give the buyback to that desk if you don't know anybody. And, most important, if you think the buyback person is doing a crummy job, give the order to someone else. But please, no more Dutch tenders.

Random musings:

Think you are about to get added to the S&P? Why not file a 5 million-share shelf that is ready and waiting for the eager-beaver indexers? Take advantage of that pop to sell equity...Lotta desks at half staff today. Call me a Grinch, but I always love coming to work the half days, like getting out of school early for the holidays...I want to wish everyone a Merry Christmas and for those of you signing off for now, a Happy New Year.

James J. Cramer is manager of a hedge fund and co-chairman of At the time of publication, the fund had no positions in the stocks mentioned, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to at