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Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

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17.6 REPURCHASE OF SHARES

17.6.1 Modes of Share Repurchase

Companies often buy-back their issued shares from the shareholders. So repurchase is nothing but the buy-back of the shares. There are different modes of the repurchase. They are as follows:

  1. Self-tender offer at a fixed price;
  2. Self-tender offer within a price range;
  3. Open market purchase.

In case of fixed-price, self-tender offer, the company makes a formal offer to shareholders to buy-back a certain number of shares at a specified price. The quoted price is higher than the market price in order to attract the shareholders.

Alternatively, the company may make a formal offer to shareholders to buy-back the shares quoting a floor and a ceiling price. The minimum price is higher than the ...

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