What is an 'Accelerated Share Repurchase - ASR'

An accelerated share repurchase (ASR) is a specific method by which corporations can repurchase large blocks of their outstanding shares via an investment bank on an expedited basis. The accelerated share repurchase is usually accomplished in two steps. First, the company enters a forward sale agreement with the investment bank and pays cash upfront. Second, the investment bank borrows the shares from clients or share lenders and delivers the shares to the company, which immediately reduces outstanding share count. Over time, ranging from one day to several months, the shares are returned to these share lenders by the investment bank through purchases in the open market.

BREAKING DOWN 'Accelerated Share Repurchase - ASR'

Accelerated share repurchases allow corporations to transfer the risk of the stock buyback to the investment bank in return for a premium. The corporation is, therefore, able to immediately transfer a predetermined amount of money to the investment bank in return for its shares of stock. ASRs are often used to repurchase shares at a faster pace and reduce the amount of shares outstanding right away.

Example of an Accelerated Share Repurchase

Mosaic Co.'s 2015 Repurchase Program allows it to execute share buybacks through open market purchases, privately negotiated transactions, and accelerated share repurchase agreements. In May 2015, under the ASR, Mosaic advanced $500 million and received an initial delivery of over 8.33 million shares of common stock. When the ASR was settled two months later, Mosaic received an additional 2.77 million shares. In February 2016, it entered into another ASR contract to repurchase shares for $75 million. Management of the company was interested in reducing outstanding share count of the company in a faster way than normal periodic share buybacks in the open market. The ASR gave&certainty to the average cost of the buyback, achieved the company's goal of reducing shares outstanding within a matter of months, and simultaneously led to an immediate earnings per share (EPS) accretion (due to the lower share count).

Accounting for an ASR

Under generally accepted accounting principles (GAAP), the forward contract that a company enters into with an investment bank is considered an equity instrument. While the ASR is outstanding the value of the shares can fluctuate - if the shares increase in price, the company would assume a liability; if the price falls the company would record a receivable. However, whether an asset (payable) or liability (receivable), the change in the value of the forward sale agreement remains off balance sheet. In other words, the balance sheet does not reflect the potential asset or liability value of the ASR before the ASR settles.  

  1. Share Repurchase

    A share repurchase is a program by which a company buys back ...
  2. Direct Repurchase

    Direct repurchase is the buying of shares in a publicly-traded ...
  3. Buyback

    A buyback is a repurchase of outstanding shares by a company ...
  4. Rule 10b-18

    Rule 10b-18 is an SEC rule that protects companies and their ...
  5. Term Repurchase Agreement

    Under a term repurchase agreement, a bank will agree to buy securities ...
  6. Fully Diluted Shares

    Fully diluted shares is the total number of shares that would ...
Related Articles
  1. Investing

    Breaking Down Stock Buybacks

    Learn about stock buybacks and how they affect financial ratios and stock value.
  2. Investing

    Stock Buyback/Repurchase

    A stock buyback, or repurchase, occurs when a company buys its own shares off the market and therefore reduces the amount of stock outstanding.
  3. Investing

    Wal-Mart's Share Repurchase Isn't All Good

    Wal-Mart announced huge internal investments along with an aggressive share repurchase program that isn't as good as it initially sounds.
  4. Investing

    What's Your Stock's Repurchase Premium?

    Take a closer look at your favorite stock's statement of equity; you never know what you're going to find
  5. Investing

    6 Bad Stock Buyback Scenarios

    Buying back shares can be a sensible way for companies to use extra cash. But in many cases, it's just a ploy to boost earnings.
  6. Investing

    Repurchase Agreement

    A repurchase agreement is the equivalent of a short-term collateralized loan. An owner of marketable securities sells those securities to a buyer for cash. As part of the deal, the seller agrees ...
  7. Investing

    Skyworks Announces $500 Million Stock Repurchase

    Along with a Q1 earnings beat, Skyworks announces a newly approved stock repurchase plan.
  8. Investing

    Execs Profiting From Record Buybacks: SEC Official

    Insiders sold some $500,000 in stock daily in the 8 days following a buyback notice, a 400% surge.
  9. Investing

    Stock Buyback Report: Was it a Smart Strategy in 2015? (AAPL, MSFT)

    Find out the story behind company stock buyback programs and how some of the larger stock buybacks of 2015 have fared for shareholders.
  10. Investing

    10 Stocks Poised To Outperform On Record Buybacks

    Buybacks are at a 10-year high and may fuel more stock market gains
  1. How do share redemptions and repurchases differ?

    Share repurchases happen when a company purchases shares back from its shareholders. Redemption is when a company requires ... Read Answer >>
  2. Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens ... Read Answer >>
  3. Repo agreements versus vs. reverse repo agreements

    Learn about repurchase agreements and reverse repurchase agreements, their risks and tax implications, and where the Federal ... Read Answer >>
  4. How Can Trading Volume Exceed Shares Outstanding?

    The number of shares traded can be greater than the number of outstanding shares, but it's rare. Read Answer >>
Trading Center