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Why Emergent BioSolutions Popped by Over 4% Today

By Eric Volkman – Nov 12, 2021 at 5:35PM

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The company has given 250 million reasons why investors should buy its stock.

What happened

It's always pleasant when one of our stocks pays us rather than the other way around. Such is the case with vaccine and antibody company Emergent BioSolutions (EBS 2.67%), which closed Friday more than 4% higher after it announced it would open its wallet to buy shares of its own equity.

So what

Emergent BioSolutions is launching a fresh share-buyback program under which management is authorized to repurchase as much as $250 million worth of its common stock. This new initiative has a one-year duration ending on Nov. 11, 2022.

Stethoscope atop $100 bills and pennies.

Image source: Getty Images.

The company can certainly afford it. As of Sept. 30, it held cash and cash equivalents totaling nearly $404 million. It does not currently pay a dividend, a common source of fund outflows for big companies.

Emergent BioSolutions clearly feels it has the financial muscle to make these buys while spending capital to expand its business. The company quoted CEO Robert Kramer as saying of the new share repurchase plan: 

This announcement demonstrates our confidence in Emergent's business and the strength of our balance sheet and cash position, providing the flexibility to implement this program while simultaneously pursuing opportunities to invest and grow the business both organically and through potential acquisitions.

Now what

Cash and equivalents holdings aside, $250 million over the course of one year is rather modest by Emergent's standards. In 2020, the company earned nearly $1.6 billion in revenue while booking a $305 million net profit.

Although it's debatable whether any company's precious financial resources are best served buying its own stock, Emergent investors obviously believe this is a clever move that will boost the market's confidence in the company.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Emergent BioSolutions. The Motley Fool has a disclosure policy.

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