Scholastic: Would Harry Potter Already Take Profits? (SCHL)

Scholastic Corp. (SCHL-NASDAQ) is up more than 13% after announcing the $200 million accelerated share buyback plan after the close on Friday.  This is always a tough decision, but what do you do when almost your entire goal and entire expectation of a trade is reached in a sinle day?  The answer is usually, "take the money, jump on your magic broom, and fly off to the bank."

We surmized that Harry Potter was buying Scholastic (SCHL) stock with the news on Friday because it looks like most of the Harry Potter profits from this book release are being put to use to repurchase shares to shrink the float.  On a fully diluted equal basis, by reducing the float by 14% and if everything else remains entirely static then you could imply a theoretical 13% to 17% expected stock move depending on your math.  Of course, the world isn’t static and the opinions of the impact on shares from buybacks varies as much as the opinions on the Harry Potter craze.

With shares up more than 13% at $36.95 and with it hitting a new 52-week high of $37.30 today and with the shares already up in that estimated ‘stock impact range,’ it would be hard to imagine that Harry Potter himself would be doing anything other than hopping onto his Nimbus 2000 and flying off to the bank. 

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.