Thursday, September 20, 2012

Manhattan Bridge Update

Readers may recall that last week an interview with Manhattan Bridge Capital CEO Assaf Ran was carried here. In our conversation, I implored Mr. Ran to buy back shares at the large discount to book value at which the company trades, rather than continue to invest at the company's current rate of return. Mr. Ran promised to take my request to the board, and publicly announce the board's decision. That decision was announced yesterday.

Manhattan Bridge Capital (LOAN) has announced a one-year authorization to buy back 100,000 shares. While this represents only about 2.5% of the company's shares outstanding, it is a large amount relative to the 4,000 or so shares of the company that trade per day. Not only would this share repurchase represent a good use of capital (since shares trade at a 50% discount to tangible book value, which are mostly comprised of financial assets), it should also significantly increase the demand for shares and thereby put upward pressure on the share price.

At the same time, however, it's worth noting that many companies authorize buybacks and yet repurchase nary a single share. Hopefully that's not the case here; time will tell.

Disclosure: Author has a long position in shares of LOAN

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