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Monday, September 01, 2014 7:36:04 PM
Accelerated Share Repurchase Programs
Heck, this is interesting
http://blogs.law.harvard.edu/corpgov/2013/03/14/questions-surrounding-share-repurchases/
An “accelerated share repurchase” program (ASR), also known as an “accelerated share buy-back” (ASB), is another method companies employ to repurchase their shares. In a typical ASR, the company enters into a “forward” contract with an investment bank at the inception of the program. At that time, the company typically makes an upfront payment to the bank, and the bank borrows the company’s shares in the market from existing shareholders and delivers those shares to the company. The bank satisfies its obligation to return the borrowed shares by purchasing shares in the open market during a pre-agreed period of time. Typically, the company receives additional shares at the end of that period although depending on the stock performance and the initial delivery of shares, the company may be obligated to return some of the shares to the bank, or pay cash instead.
An ASR allows a company to retire the shares when delivered, with a substantial percentage delivered (and retired) at the inception of the transaction. Often the programs provide companies with the ability to repurchase shares at a discount to the trading price of the shares during the term of the program. ASRs also can be tailored to meet a particular company’s risk appetite by incorporating additional features, such as collars, caps and knock-out days, all of which can be used to limit the company’s exposure to future increases in stock price.
While purchases made pursuant to an ASR do not fall within the Rule 10b-18 safe harbor, in practice ASR agreements are structured to meet many of the rules’ requirements. ASR programs are also typically structured as 10b5-1 plans, which provide the benefits of those plans, but also limit the company’s flexibility in controlling the repurchases.
Heck, this is interesting
http://blogs.law.harvard.edu/corpgov/2013/03/14/questions-surrounding-share-repurchases/
An “accelerated share repurchase” program (ASR), also known as an “accelerated share buy-back” (ASB), is another method companies employ to repurchase their shares. In a typical ASR, the company enters into a “forward” contract with an investment bank at the inception of the program. At that time, the company typically makes an upfront payment to the bank, and the bank borrows the company’s shares in the market from existing shareholders and delivers those shares to the company. The bank satisfies its obligation to return the borrowed shares by purchasing shares in the open market during a pre-agreed period of time. Typically, the company receives additional shares at the end of that period although depending on the stock performance and the initial delivery of shares, the company may be obligated to return some of the shares to the bank, or pay cash instead.
An ASR allows a company to retire the shares when delivered, with a substantial percentage delivered (and retired) at the inception of the transaction. Often the programs provide companies with the ability to repurchase shares at a discount to the trading price of the shares during the term of the program. ASRs also can be tailored to meet a particular company’s risk appetite by incorporating additional features, such as collars, caps and knock-out days, all of which can be used to limit the company’s exposure to future increases in stock price.
While purchases made pursuant to an ASR do not fall within the Rule 10b-18 safe harbor, in practice ASR agreements are structured to meet many of the rules’ requirements. ASR programs are also typically structured as 10b5-1 plans, which provide the benefits of those plans, but also limit the company’s flexibility in controlling the repurchases.
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