Accelerated Share Repurchase (ASR): A Comprehensive Guide
The accelerated share repurchase is a method that a company will use in order to buy back shares of their own stock. Here are the basics of the accelerated share repurchase and how it works.
Accelerated Share Repurchase
With the accelerated share repurchase, a company will work with an investment brokerage in order to quickly buy shares of their stock. They will give the brokerage a certain sum of money, and the brokerage will then guarantee that it will provide them with an amount of shares. The investment brokerage may not have enough shares to complete the transaction. However, it will accumulate the shares needed from various clients and the open market. This process shifts the burden of completing the transactions from the company itself to the investment brokerage.
Purpose
This process is used so that the company can purchase as many shares as possible in a timely manner. This shortens the amount of time in which they are able to reduce the number of shares in the marketplace. A company will periodically go through this process in order to boost the amount of earnings per share. This has the effect of raising the stock price for the investors that still have shares.
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