TD Ameritrade’s largest shareholder said Wednesday it had sold 15 million shares of the company, giving the Omaha-based discount stock broker room to buy back more of its own shares.
TD Bank Group said in a filing with the Securities and Exchange Commission that it sold the shares Tuesday at $21.72 each “in a transaction directly with a market maker,” or a Wall Street firm that acts as both a buyer and seller of stocks. The sale reduced TD Bank Group’s stake in Omaha-based TD Ameritrade to 42.4 percent from 45 percent in March 2012.
TD Ameritrade, the founding Ricketts family and TD Bank Group have agreed to limit the Canada-based company’s ownership of the brokerage and wealth manager to 45 percent of shares outstanding.
The board of TD Ameritrade earlier authorized the company to buy back as many as 24.9 million of its own shares.
“We continue to have a number of options available to us: investing in growth, buying back shares, issuing a quarterly dividend or a special dividend, and repaying our debt,” said TD Ameritrade spokeswoman Kim Hillyer. “This news gives us something additional to consider, but it doesn’t change our overall strategy.”
Companies buy back their own shares when their managers decide it is the best use for cash reserves, and usually when the stock is seen as undervalued.
“It is a good way to return capital to the shareholders,” said Richard Repetto, a stock analyst for New York-based Sandler O’Neill Partners who follows TD Ameritrade. “I think they will execute their buyback, although they will be somewhat sensitive to price with the stock near 52-week highs.”
TD Bank wrote in the SEC filing that if TD Ameritrade engages the full buyback authorization, its beneficial ownership of the broker will rise to 44 percent.
The per-share price TD Bank Group sold at was almost a dollar below TD Ameritrade’s closing price Tuesday. Such discounts are common in privately negotiated bulk transactions to a single buyer.
The sale reaped proceeds of about $326 million for TD Bank Group, which operates about 1,300 branches in the United States. The company still owns 232.4 million TD Ameritrade shares, a stake worth about $5.2 billion at the broker’s Wednesday closing share price of $22.40. TD Ameritrade’s shares have risen 34 percent so far in 2013.
TD Ameritrade was founded in Omaha in the 1970s and developed systems that allowed investors to buy shares via telephone and then computer, at large discount to the commissions charged by full-service brokers. The company employs about 2,000 people in Omaha.
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