Stock Buybacks

Stock Buybacks - Financial Analysis and Valuation FBE 421...

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Unformatted text preview: Financial Analysis and Valuation FBE 421 Michael Keane UNIVERSITY OF SOUTHERN CALIFORNIA Stock Buybacks Fall 2009 2 Stock buyback - decision mechanics TOPICS Keane 3 Buybacks: Three Types Open market buyback Tender offer buyback Fixed price Dutch auction Private negotiated buyback 4 Buybacks: Historic rise 1980: $ 5 billion 2005: $349 billion 5 Buybacks: Open market The most popular buyback method Typically an announcement is made firm may buy back shares from time to time at market price no firm commitment to do it May span months or years Price reaction upon announcement is mildly positive 6 Buybacks: Key Valuation Issues Type of buyback Size of buyback Premium paid Source of funds 7 Buybacks: Sample Tender offer buyback Up to 2.0 million shares of common stock Not greater than $22.00 Nor less than $20.00 May be a minimum tender requirement Expires in 30 days 8 Buybacks: Sample If more than 2.0 million tender purchase pro rata odd lots (less than 100 shares) are given priority Payable in cash net of taxes but no commissions Buyer is the company The offer can be extended, amended or terminated...
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This note was uploaded on 01/16/2010 for the course FBE 421 at USC.

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Stock Buybacks - Financial Analysis and Valuation FBE 421...

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