How companies repurchase shares:
| Open Market | Accelerated (ASR) | Tender Offer | |
|---|---|---|---|
| Description | Traditional and flexible approach, allowing for repurchases of shares in the secondary market at the prevailing market price at the time and amount of the issuer’s choosing | A derivative strategy allowing issuer to retire a large block of stock at inception realizing an EPS benefit upfront, while repurchasing shares at a discount to VWAP | A balance-sheet transformational approach for repurchases typically ~10% or more of shares outstanding made at a premium to the prevailing market price |
| Flexibility | Ability to be opportunistic, adjusting repurchases based on market conditions and other corporate initiatives | Committed share repurchase strategy that cannot be “turned off” | Committed share repurchase strategy that cannot be “turned off”; success of tender not guaranteed |
| Cost | Commission per share | No commission; shares repurchased at a discount to VWAP | Premium to market price; Dealer manager fees and legal fees |
| Purchase Price | Prevailing market price execution | Discount to average VWAP; price risk over the repurchase period | ~10 to 15% premium to prevailing market price |
| Market Impact | Volume limited to 25% of prior 4 full weeks ADTV; repurchases 10-15% of ADTV have limited market impact | If disclosed, can see a “pop” in the stock price to compensate for the immediate EPS benefit to be realized | Major market impact with stock typically trading up to the tender premium |
| Legal | Board approved share repurchase authorization; 10b-18 or 10b5-1 repurchase agreement | Board approved share repurchase authorization; 8K if ASR is of material size; ASR agreement | Board approved share repurchase authorization, Schedule TO; Dealer Manager agreement |
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