As Dave shared last week, stock buybacks are expected to top records in 2025. While the WSJ reported that buybacks are “particularly concentrated at the top, with the 20 largest companies accounting for almost half of repurchases,” I suspect there may be quite a few companies implementing share repurchase programs for the first time and trying to get their arms around structural and regulatory considerations. To that end, here’s a timely HLS blog penned by Cravath that discusses structuring share repurchase programs.

When looking at the alternatives – including, relatively simple open-market share repurchases (“OMR”), more complex accelerated share repurchase transactions (“ASR”) and a hybrid in between, enhanced open-market share repurchases (“eOMR”) – the blog suggests companies begin with these considerations:

– The level of control over the daily spend of the share repurchase activity;
– The ability to terminate the share repurchase activity;
– The ability to receive a large upfront delivery of shares;
– Whether to use a derivative transaction to effect share repurchase activity; and
– The ability for such share repurchase activity to qualify for the Rule 10b-18 safe harbor and/or constitute a Rule 10b5-1 plan.

The blog then considers OMRs, ASRs and eOMRs in detail. Here is a short summary of how these structures stack up against the above considerations:

OMRs provide the public company greater control over share repurchase activity and allow the share repurchase activity to be terminated at any time. But they don’t allow for a large upfront delivery of shares to be repurchased. OMRs are typically executed pursuant to the broker-dealer’s form of Rule 10b-18 agreement, and a Rule 10b5-1 plan can govern the terms of share repurchases if a company wishes to continue share repurchase activity through a closed window period.

ASRs offer a public company the ability to receive a large upfront delivery of shares to be repurchased plus certainty on the per-share repurchase price (discount to the average Rule 10b-18 VWAP during the term of an ASR (subject to any lookback option)). But it also means that it relinquishes control over the daily spend of share repurchase activity and the day the transaction will terminate. ASRs do not qualify for the Rule 10b-18 safe harbor but may be structured to reduce the risk of alleged manipulation. They are typically structured to meet the requirements of Rule 10b5-1.

In an eOMR, the public company relinquishes control over the daily spend but it retains the ability to terminate at any time (but, as described in the blog, the investment bank may be relieved from its reimbursement obligation for potential underperformance and the public company remains liable for the potential outperformance payment). An eOMR is typically structured to meet the requirements of Rule 10b5-1. It may qualify for the Rule 10b-18 safe harbor if it is structured so that the share repurchase activity is executed on an agency or riskless principal basis, where shares are repurchased in the open market.

If these terms are all new to you, check out the full blog for background and take a look at our Stock Buybacks Handbook and our Rule 10b5-1 Trading Plans Handbook.

– Meredith Ervine