IBD sets plan a month after activist investor Marcato Capital took a 6.3% stake.
A month after an activist hedge fund took a large stake in the company, LPL Financial Holdings Inc. said Thursday morning it had authorized a $500 million buyback of its shares and intends to reduce its rate of expense growth in 2016.
“We are buying back shares because they are cheap,” said chief executive Mark Casady in an interview. “We are also making clear what our expense growth rate will be in 2016 and that it will be lower than 2015.”
LPL's board authorized the share buyback program as part of an updated capital management plan “to create greater shareholder value,” the firm said after releasing its earnings report.
The move comes nearly a month after news that activist hedge fund investor Marcato Capital Management took a 6.3% equity stake in LPL, due to its view that LPL's shares were undervalued.
“None of us are happy with the performance” of LPL shares, Mr. Casady said. “There is no light of day between what Marcato and other shareholders want,” which is to see the price of LPL shares increase, he said.
LPL shares were up 3% on Thursday morning, trading at $42.48 as of 11 a.m.
LPL posted mixed results for the quarter ended Sept. 30. Its net revenue — $1.05 billion — was down 3.2% when compared with the same period in 2014. Net income of $41.1 million was up 23.4% compared with the same period a year earlier. LPL's advisers workforce of 14,073 increased 1.2% compared with September 2014.
Mr. Casady added, after its $1.4 million settlement in September with state regulators for inappropriate sales of real estate investment trusts, that the company was in “good shape” with the regulators. “The parade has moved on to other broker-dealers,” he said. “They are entering the phase we were in two years ago.”
LPL has been hit with millions of dollars in regulatory fines over the past several years and has invested in staff and technology as a result.
An earlier version of this story incorrectly stated that LPL "intends to cut expenses in 2016." It is still increasing spending overall in 2016, although at a slower rate than in 2015.
