There isn't much to NOT like about Swoop except their share price @Slideup and only then if you've already bought as much as you want to. The Buyback makes sense to me because they can't see anything out there that is actually as cheap as they are in the Telco/ISP sector. They IPO'd via that reverse takeover of Stemify (SF1) in May last year at 50 cps, shot up to over $2/share by the end of August, tagged $2.46/share during trading on September 22nd, and it's basically been all down hill from there. Classic case of an over-hyped stock amongst a small group of followers who got too carried away, and then lost interest as the share price headed steadily South East for around 12 months. They have short sharp spikes on positive news and then it all unwinds again within a few days and down they go again. The two cheapest companies in the sector that I currently like the most are SWP and ABB (Aussie Broadband) which has lost its halo recently (fallen from grace).
I have posted here about the management at Swoop and their pedigrees, however in the context of this discussion (about their buyback) the most relevant factor is that they are all shareholders. As I explained in detail in my Bull case which I posted in the FY23 Stock (Company) Picks forum, the Board and senior management (key management personnel) own just over 25% of the company, with Andrew (Twiggy) Forrest's private family investment company Tattarang Ventures owning another 16.25%, and one of the guys who built up and sold NodeOne (and N1 Wholesale) to Swoop, Nick Van Namen's family trust (N & J Enterprises (WA) Ltd) owning another 6.36%. I'm unsure if Nick has much to do with Swoop now, his LinkedIn Profile suggests that he does not. However the guys that are running Swoop own one quarter (just over 25%) of the company. They therefore think and act like business owners rather than simply business managers, because they are owners of the business and have a reasonable amount of their own personal wealth tied up in Swoop.
So a buyback makes perfect sense when they're trading under their 50c/share IPO price, and they have made a heap of acquisitions since they IPO'd which have all been decent buys and have been integrated into the Swoop business and are proving to be earnings accretive. They are a Telco roll-up that is still just getting started, so they have a while to run before I'd have any serious concerns about them, although, as with all growth-via-acquisition companies, I keep a close eye on them. They have so far used combinations of cash and shares to pay for acquisitions and I expect them to keep using both forms of payment, depending on each acquisition, and what the owners are prepared to accept. I think they can do a buyback and also continue to acquire other businesses, both at the same time, like walking and chewing gum, not too hard, but I believe they have a level above which they will be less likely to buy back more shares. To date they haven't paid more than 43c/share, and I think they could go up to 47c/share, but it appears they might have set the limit initially at anything below 44c. If they were buying my business and offering me shares with a face value of below 44c/share each, I'd be keen to take as much of the purchase price as I could in shares. Below 44c seems VERY cheap to me for what they are now, let alone their future potential if the story plays out as planned.
With regards to your query about giving them money for the purposes of acquisitions and them giving it back at a lower price, I agree that makes very little sense from an investor's perspective, but that only applies to those investors who are prepared to sell their shares at below 44c each (so far). And if shareholders were willing to buy shares at over $1.80 in October last year (and they issued shares at $2.09 in November - see here: Swoop-Completes-Countrytell-and-Voicehub-Acquisitions.PDF) - and sell them less than one year later for less than one quarter of that price, then they are clearly going to lose money. But that ONLY applies to the sellers. Those that hold haven't lost anything except market value, which is really just about sentiment. Once you sell, it becomes a real loss, but a paper loss is neither here nor there when the true value of the company is significantly higher than the market value and you hold onto the shares. From the company's perspective, doing that makes a LOT of sense. A HEAP of sense. They are buying back shares now that they issued less than a year ago at more than 4 times the price. I can't fault the company for doing that. It's exactly what I would do if I controlled the company.
Share buy backs always make sense to me when both I and the company's Board believe that the intrinsic value of the company's shares is significantly higher than where they are currently trading, and that definitely is the situation at Swoop right now. It makes less sense when they are trading at fair value, and if they are trading above fair value, it suggests that the company has no other better use for those funds, but Swoop are cheap, not trading at fair value or above fair value, so it DOES make sense. Every share that gets bought back and cancelled increases the value (fractionally) of every remaining share, so it's always earnings accretive. In other words, if they have 500 million shares and they are earning 10 cents/share in NPAT (i.e. $50m), and they buy back 100 million shares and cancel them (leaving them with 400 million shares) and then they go on to earn exactly the same $50m of NPAT the following year, that's now 12.5 cents/share of earnings (EPS) instead of 10 cents/share, without the company having to grow their top or bottom line at all. The profit doesn't change but is is now divided by a smaller number of shareholders so each shareholder gets more of the profit.
That is obviously just an example, and the reality is that the amount of shares they will buy back will likely be a much smaller fraction of their overall shares outstanding so will have a MUCH smaller impact on the value of the remaining shares, but the reality is that it IS earnings accretive to buy back your own shares at a discount to intrinsic value. It DOES increase the value of every one of the remaining shares, even if the value increase is really small and hard to measure. It gets more complicated when companies borrow money to buy back shares, because then you've got to look at the borrowing costs, etc, but it CAN still be a good idea, especially if the share price was particularly cheap and then recovers within a reasonable amount of time and the company is able to issue more shares at higher prices and extinguish the debt they used to buy the shares at the cheaper prices.
However, when a company is just using their own cash (as Swoop is) to buy back their own shares at a significant discount, it's a pretty clear-cut win in my view.