Actionable Ideas for Companies and Sponsors
Increasing Structured Share Repurchase Activity
Recent volatility in the equity markets is driving a record pace of share repurchase activity. Companies evaluating a share buyback, often look to signal confidence in their business and balance sheet through an Accelerated Share Repurchase (ASR). The increased volatility also makes ASRs more attractive from a pricing perspective given the resulting higher discount on the repurchase price.
We are also seeing share repurchases in connection with insider sell downs, especially from sponsors. Over the past year, more than 30% of sponsor sell-downs in the U.S. were coupled with a share repurchase from the company. The concurrent repurchase has proven to be an efficient way to enhance the size or pricing of a secondary share offering in an otherwise challenging market. On average, blocks with a share repurchase have priced at tighter discounts and traded better in the aftermarket.
We expect share repurchase and ASR activity to remain robust throughout the year and Jefferies has unique insights into these execution strategies.