Shares of ReneSola Ltd., a Chinese maker of solar products, bounced Monday morning after the company announced it will buy back shares and adopted a "poison pill" plan designed to ward off a hostile takeover.
The so-called poison pill would allow current shareholders to buy more shares if any individual acquires more than 15 percent of the company's shares. Companies sometimes adopt such plans if they are approached by a potential buyer but they do not want to sell. However, ReneSola said that its poison pill was not in response to any specific effort.
The company also said it planned to buy back up to $100 million worth of shares. CEO Xianshou Li said in a statement that the company is buying back the shares because it believes they are undervalued.
"Despite relatively weak capital markets and a challenging solar market, we are confident in the long-term prospects of our business and the industry as a whole," he said.
Companies usually tout share buybacks as proof that they believe their shares will go up, because presumably they wouldn't buy shares otherwise. But the buybacks are also a way to give shares a short-term pop or draw attention away from bad news.
ReneSola saw its net income plummet 95 percent in the latest quarter, partly because cuts in European subsidies weakened demand for the solar power products that it makes.
Shares climbed nearly 9 percent, or 26 cents, Monday morning to $3.25. But for the most part they've been falling since February, when they reached over $12.
SOURCE: http://www.businessweek.com/ap/financialnews/D9P97JEO1.htm
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