Share buy-back hopes boost Elan
Shares in the Elan Corp surged today on market expectations it will shortly announce a major share buyback and restructuring programme as a step towards restoring investor confidence.
By noon, Elan, which is being investigated for its accounting practises, gained nearly 15 per cent in Dublin to 12.0 euros -- up from a year low of 10.0 euros but a far cry from a the 52 euros they reached in January.
Shares in what was once Ireland's biggest company lost more than 75 per cent of their value after it said earlier this year that 2001 profits would have been significantly lower if it had consolidated two off-balance sheet vehicles into its accounts.
Confidence in the group was also damaged by a profit warning in February, and setbacks to its research into a new treatment for Alzheimer's disease, for which the market had high hopes.
An industry source said yesterday that the company was likely to announce a major share buyback programme -- which could be as much as $500 million according to one report -and changes to its board.
The company declined to comment.
If it happens it will of course have an immediate effect on earnings. They would be taking out about 50 million shares, said one Dublin-based analyst who declined to be identified.
With Elan stock rated below investment grade, refinancing that debt could be costly, requiring the firm to keep its cash reserves high and thus limiting its room for manoeuvre elsewhere, like funding clinical trials.
Media reports said Elan could announce details of its plans later this week.
The company is due to release second-quarter results and hold its annual general meeting on July 31.