Throughout this article, please understand that the described reductions in share count have nothing to do with any type of meaningless “reverse split”.
In the event that RH announces yet another shift in the capital structure (i.e.
the next leg of the stock buyback or the next debt pay down), such a spike would most likely be permanent rather than temporary.
The shares repurchased by RH were bought at far lower levels and much of these purchases were conducted with cash (not just debt), such that even the comparable rise in enterprise value is also far much lower that this sharp rise in the share price.
In other words, comparing the price of a single share between one period and the next is no longer a consistent picture of the valuation of RH as a whole.
The share price has already nearly doubled since those purchases.
Because of its increased leverage, the market has been very focused on RHs “capital structure”. As a result, when RH suddenly announced three weeks ago that it was already paying down its 0 million second lien term loan (within just 3 months of it being issued), the stock quickly shot up 20 points from the s to the s, quickly hitting new 52 week highs.
There are a variety of announcements that Friedman could be expected to make at (or in advance of) this “”.
The most obvious announcement would be that RH would announce the simple approval of the next leg of its ongoing share buyback.
All that is necessary for Friedman to receive this payout is the financial engineering and ongoing reduction of share count coupled with even just very slight improvements in RHs business (in fact, whether real or perceived). Friedman did not waste any time in putting his plan into action.