EDU Articles
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What is an Accelerated Share Repurchase?
An Accelerated Share Repurchase (ASR) is a method by which companies can buy back a significant amount of their outstanding shares with the help of an investment bank.
By enlisting the help of an investment bank to accelerate a buy-back, a company can cleanly retire a large bulk of shares at once. These agreements have come into use in the last 10 years, and there is of course some variation in their composition. They fall under a category of buybacks known as structured buybacks.
In general, a company will enter into an accelerated repurchase agreement with an investment bank, and the investment bank will help facilitate the buyback by immediately delivering the number of shares requested to the company at the outset of the agreement. This allows the company to retire the desired number of shares very quickly.
The investment bank, meanwhile, has borrowed many of the shares delivered to the company in a short-selling agreement with investors. The investment bank will cover its short positions by buying shares on the market and returning them to the shorted accounts.
The cost to the company who repurchased shares will add up over this time period, subject to the terms of the agreement with the bank, and they will settle when all of the shorted shares have been accounted for, generally.
Some people have spouted off that these are a way for companies to buy dips in their own stock, but they do not realize that the company will probably end up paying more this way than in a regular stock buyback program. They will pay a premium for the help of the investment bank and the ability to retire a set number of shares quickly.
Retiring shares can be a way to counteract dilutive effects of exercised stock options, or to raise the earnings-per-share of their stock, or other reasons.
What are the Expenses Associated with the Purchase of ETFs?
There may be fees and commissions involved in the purchase of ETFs, and ongoing expenses that reduce earnings over time
What is Insider Trading?
Simply put, insider trading is the crime of trading in a company’s stock based on information not available to the public
What’s a 403(b) Plan?
A 403(b) Plan is essentially a 401(k) for publicly-funded institutions such as public schools and universities
Who Can Contribute to a Roth IRA?
Most people will be able to contribute to a Roth, but once your income hits certain limits, you may need to find another way
Where Should I Open an IRA?
It is completely your choice! IRAs can be opened at almost any large bank or brokerage firm, giving you plenty of options
What is an "Ex-Dividend"?
Ex-Dividend is a classification on a stock that indicates the dividend payable is to the seller of the stock, not the buyer
What is the Difference Between a Growth and Value Stock?
Growth stocks tend to be younger companies focused on using capital to fuel more growth, whereas Value stocks have...
What is Unsystematic Risk?
Unsystematic risk is unique risk that does not reflect a direct correlation with the risk present in the market
What is an asset mix?
An asset mix is the blend of major asset classes in a portfolio, which should be constructed based on the risk tolerance
What is the Broadening Wedge Descending (Bearish) Pattern?
The Broadening Wedge Descending pattern forms when a currency pair price makes lower lows and lower highs, forming two slopes