Ann: Quarterly Activities and Cashflow Report - A, page-13

re: Ann: Quarterly Activities and Cashflow Re... Sure. There's currently 1.4m shares for sale in total. For the sake of our hypothetical example, lets just buy them, for a total cost of $300,000. This represents 0.3% of WECS cash, Still leaving it with slightly in excess of $100 million.

Every day a company should be maximising the return on every dollar it invests. It is extremely unlikely that any other investment WEC is currently undertaking would generate more cash per remaining share than repurchasing its own shares for 60c in the dollar.

Furthermore, the market is currently telling you that quite contrary to investing in cash generating investments as you suggest, it expects WEC to invest its cash at a loss. This is why companies trade under cash backing. If this is the case, returning cash to shareholders is the prudent thing to do, and in the case of such massive shorting, a buyback would send a clear signal of sensible capital management to the market.

It is not the norm to spend a material proportion of a company's cash on a buyback, but for the sake of our hypothetical example, imagine if they did. Imagine if they could buy back half the shares at the current level, we'd have 161m shares and 68.8m cash, up from 31 to 42cps. A capital return is starting to look quite juicy, over 100% return on share price. Why not keep going, if they bought all but one, that share would be worth $32m!

The environment in which the company is operating is quite different from when the funds were raised, in particular the outlook for coal and clearly, the purpose of those funds has changed. It would not be an admission of failure for the company to allocate a small proportion of these funds to restoring investors faith in their investment.

Heaven help WEC if it ever needs to return to the market for further equity...