Dominion Diamond Should Buy Back Stock, Say Investors

Finance and Trade
31/12/2015 11:08

In the latest development in the story of Dominion Diamonds' disgruntled shareholders' displeasure with Dominion's (mis-)management, Reuters reports that two shareholders, who asked not to be named but together own nearly 3% of Dominion, said the company could use some of its nearly $300 million in net cash for a stock buyback. The stock has fallen by nearly 60% since May, though its stock surged nearly 24% on Dec. 22 as an investor group pushed for an overhaul. The cash pile is equal to about 35% of Dominion's market value. The miner also has nearly $250 million worth of diamond inventory and is virtually debt-free. "The allocation of capital has been non-existent," said one of the shareholders.

As widely reported last week, a group of investors led by Toronto-based K2 & Associates said in a regulatory filing on Dec 21 that they had requested a meeting with Dominion's independent directors as the company's "share price has suffered excessively and unnecessarily as a result of misguided policies and missed opportunities." The K2 group plans to ask for several seats on Dominion's board and will try to put forward its own slate of directors if it cannot oust the miner's chairman and its chief executive. Reuters clarifies that one of the shareholders who urged Dominion on Wednesday to buy back stock is part of that group while the other is not. This is not the first time Dominion's investors have called for a buyback.