Wendy's Buyback is a Good Move

Implications: The article focuses on Wendy's recent announcement to buy back up to 35 million shares (around $800 million) over the next 18-24 months.  The company says that the move is motivated by the desire to "return value" to shareholders, although the author speculates that the company may have decided on buyback as a defensive move against a particular hedge fund manager who has taken a position in Wendy's.


Analysis: The move is unambiguously good news for the company and its shareholders.  One thing I like about this is that the company doesn't mention any of the bogus reasons for why buyback programs are pursued--for example, to boost EPS.  Instead, management is returning excess liquidity to shareholders, a perfectly legitimate reason. 

The author of the article may be right in that the move wasn't entirely altruistic.  Management may fear Pershing Square, the hedge fund managers, and returning excess cash makes them less of a target for criticism and for intervention from large shareholders.  But if that's what it takes for the company to do what it should have done anyway, who's to complain? 

All in all, a sound and easily defensible move by management.