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What I will describe below is how Friedman is now using a combination of positive cash flow and new debt to further reduce the share count.
Friedman is effectively conducting a “stealth/quasi/creeping” going private in order to drastically reduce share count.
Moreover, this moderate rise in valuation is arguably not far out of line with the recent improvements in financial results (and outlook) as announced in September.
The September announcement alone saw the share price spike 45% in single day.
Ultimately, for Friedman to take home his nine figure package, the equity float must go lower. The impact on the share price is entirely predictable.
Throughout 2017, RH has already repurchased half of its outstanding float at an average price of .45.
In May of 2017, RH’s CEO Gary Friedman was quietly awarded a staggering nine figure incentive package if he can somehow engineer the share price to 0 or higher.
Precisely how he achieves this goal is entirely irrelevant.
the next leg of the stock buyback or the next debt pay down), such a spike would most likely be permanent rather than temporary.
All that is necessary for Friedman to receive this payout is the financial engineering and ongoing reduction of share count coupled with even just very slight improvements in RHs business (in fact, whether real or perceived). Friedman did not waste any time in putting his plan into action.
Within just two days of that award (on May 4, 2017) RH quickly announced a 0 million share buyback to sharply reduce the share float.
If Friedman is successful, the value of the total awards to him will exceed 0 million.
At least million of this will come to him within just the next few months.