Stock repurchase programs are generally instituted when companies are flush with cash.
In the case of New Frontier, the company said it had nearly $17.3 million of cash on hand at the end of its last quarter.
Companies use buyback programs to boost share price, effectively sending a message about the stock that it's a good bargain at the current trading price. They also institute these types of programs when they want to shrink the number of shareholders, so that current shareholders become more satisfied.
Michael Weiner, chief executive officer of New Frontier, said in a statement that the timing of the repurchase program was correct and prudent.
“We believe that our common stock is currently selling below the company's intrinsic value,” Weiner said. “Through our new repurchase program, we can execute targeted purchases of our common stock that should benefit earnings per share and shareholder value as New Frontier Media pursues its strategic growth initiatives.”
Boulder, Colo.-based New Frontier offers nine full-time transactional adult-themed pay-per-view networks to cable and satellite operators across the U.S., reaching about 190 million network homes. It also provides content to video-on-demand platforms on cable and satellite and provides some adult programming to Cinemax and Showtime, as well as international networks.