Definition for : Accelerated share repurchase
In an Accelerated share Buy-back, the company buys all the shares it plans to buy back in the coming year in just one Block from a large Investment bank on day one. The Investment bank has borrowed most of those shares from Investors. After having sold them to the company which will cancel them, the bank will smoothly buy back shares on the Market over several weeks or months (so as not to disturb the Market)and repay the Investors who initially lent it the shares sold to the company.If the bank ends up having bought the shares at a highest price than the one initially paid by the company, then the company pays the difference to the bank. If the bank has bought the shares at a lower price than the one initially received from the company, then the bank pays the difference to the company.An ASB allows a company to communicate a Share buyback in a stronger way as it is carried out on day one. The EPS impact takes place immediately and is not gradual over several quarters.
(See Chapter 38 Share issues of the Vernimmen)
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