Domino’s Pizza Enterprises Ltd refutes share buyback allegations

Domino’s Pizza Enterprises Ltd (ASX: DMP) just can’t stay out of the limelight these days.

There have been recent reports alleging that Domino’s CEO and managing director Don Meij had (or has) margin loans and that Domino’s was buying back shares whilst Mr Meij was selling his shares.

In response, Domino’s said that its buyback programme has not been misused for price support to avoid a margin call being made in relation to shares held by the managing director.

Domino’s did acknowledge that there was a ‘perception of conflict’ where the share buyback was being carried out so closely to the share sales by Mr Meij. Domino’s said that it will review its buyback protocols to address this perceived conflict.

The company said that the buyback was not for the purpose of benefiting the managing director or to manipulate the market.

Domino’s said that the full details of Mr Meij’s shareholding, margin loans and intentions to sell were advised to the chairman with a reasonable opportunity to consider the information prior to any share sales occurring. The company said that the share sales occurred with the chairman’s approval in accordance with the company’s security trading policy. It said that the total shares sold in the last six months by Mr Meij were less than 2% of the company’s shares.

The company said that based on the information the company has provided, it considers that there is a prudent buffer between the company’s current share price and the margin call trigger price and that there is ‘alternative collateral to rely on in the unlikely event of a trigger occurring’.

Foolish takeaway

Either way, it’s not a good look for the company or Mr Meij with this happening right after the trouble it had with franchisees. I do think Domino’s has a promising future if it can deliver on its profit margin and outlet targets in the future. But, it doesn’t help if the CEO has to think about these issues instead of growing the business.

Investors would probably be better off if they focused their money on these top stocks instead.

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