These transcript highlights are great. I follow many of these companies and have read the transcripts, but this digest highlighting only the most unique call outs is invaluable for its holistic perspective. TY for sharing!
How do the Perimeter Solutions buybacks impact the Founder Share arrangement? Concern would be that the buybacks effectively allow them to print their own comp by driving up price and hitting "success" hurdles.
At the very least they're much more incentivized to do buybacks rather than dividends because that leads to a higher stock price and they vest into more shares each year (i.e. buybacks help ALL shareholders (vested & unvested) whereas dividends only benefit vested shareholders - who could turn around and buy more shares themselves)
Good question, I think buybacks at PRM should be evaluated the same as with any other business and if they're done at levels substantially below a reasonable estimate of intrinsic value then they will create value for continuing shareholders, and if they're done at levels above intrinsic value they'll destroy value.
You are right that the board may be incentivized to lean into share repurchases to prop up the share price and earn their incentive comp rather than return capital through dividends, so shareholders should be even more keen than normal to evaluate the levels at which management is repurchasing shares. It seems to me so far that management has been disciplined in repurchasing stock only at levels that they clearly believe the business is substantially undervalued (around $8 or so). They do a pretty good job communicating their opportunity cost when evaluating buybacks and they'll commit capital to a buyback when they believe their own stock is a better investment than any other alternatives (and given their target business returns are high-teens I think it's safe to say they believe the stock will perform better at prices which they are repurchasing).
Always great to keep an eye out for misaligned incentives and I agree shareholders should carefully follow how excess cash is being allocated given the incentive structure.
These transcript highlights are great. I follow many of these companies and have read the transcripts, but this digest highlighting only the most unique call outs is invaluable for its holistic perspective. TY for sharing!
This is great. Thanks!
How do the Perimeter Solutions buybacks impact the Founder Share arrangement? Concern would be that the buybacks effectively allow them to print their own comp by driving up price and hitting "success" hurdles.
At the very least they're much more incentivized to do buybacks rather than dividends because that leads to a higher stock price and they vest into more shares each year (i.e. buybacks help ALL shareholders (vested & unvested) whereas dividends only benefit vested shareholders - who could turn around and buy more shares themselves)
Good question, I think buybacks at PRM should be evaluated the same as with any other business and if they're done at levels substantially below a reasonable estimate of intrinsic value then they will create value for continuing shareholders, and if they're done at levels above intrinsic value they'll destroy value.
You are right that the board may be incentivized to lean into share repurchases to prop up the share price and earn their incentive comp rather than return capital through dividends, so shareholders should be even more keen than normal to evaluate the levels at which management is repurchasing shares. It seems to me so far that management has been disciplined in repurchasing stock only at levels that they clearly believe the business is substantially undervalued (around $8 or so). They do a pretty good job communicating their opportunity cost when evaluating buybacks and they'll commit capital to a buyback when they believe their own stock is a better investment than any other alternatives (and given their target business returns are high-teens I think it's safe to say they believe the stock will perform better at prices which they are repurchasing).
Always great to keep an eye out for misaligned incentives and I agree shareholders should carefully follow how excess cash is being allocated given the incentive structure.