Accelerated share repurchase
What is accelerated share repurchase (ASR)?
Also known as accelerated buy back (ABB), it is a method where corporations buy back outstanding shares of their stock. This method is occasionally chosen by trading firms as a way to reduce the number of outstanding shares for a fixed cost.
Where have you heard about accelerated share repurchase (ASR)?
A number of big companies have practiced ASRs in the last 10 years, including healthcare group Express Scripts, Home Depot and RR Donnelly. Each of these ASRs exceeded $1billion.
What you need to know about accelerated share repurchase (ASR).
In an accelerated share repurchase the trader shares are not sold – they are retired. The broker or bank then buys the shares, with the agreement that the trader covers the loss. The ASR can create a short-term increase in share prices, so companies can use this method from time to time to generate interest with little to no risk
Find out more about accelerated share repurchase (ASR).
To find out how companies can benefit from ASRs, it’s useful to understand how interest works.