In recent months, a number of companies have repurchased or announced plans to repurchase their shares. Management and boards of directors overseeing companies with significant cash stockpiles yet finding fewer mechanisms to boost earnings may soon need to decide whether or not a share repurchase is the most productive use of their cash. This post addresses the questions surrounding share repurchases that companies should consider as they evaluate the advantages, disadvantages, legal implications and strategic considerations of share repurchases.
What are the ways a company can repurchase its shares?
There are four principal ways a company can repurchase its shares, all of which are discussed below:
(1) open market purchases;
(2) issuer tender offers;
(3) privately-negotiated repurchases; and
(4) structural programs, including accelerated share repurchase programs.
Most share repurchases are effected over time through open market purchases. These are often referred to as share repurchase programs or plans.