The Cost of ASR's - Part VII - Apple Case Study

Abstract

In 2013-2017, Apple entered into 12 accelerated stock repurchase agreements (“ASR’s”) through which it repurchased, split adjusted, 693.3 million shares at $102.41 apiece for a total of $71.0 billion. Apple paid $4.023 billion (6.01%) more than if it had just made open market repurchases in those months in lieu of entering into ASR’s. Some might argue that, compared to a tender offer, which requires a steep premium, an ASR is cheap and, given volume restrictions on open market repurchases, a tender offer would have been Apple’s only alternative to ASR’s. The data does not appear to support that view. Some might say the market could not digest more open market repurchases. The data does not support that either. ASR’s spread cost over time. A company whose future share price is heading higher will find an ASR relatively costly, and that was exactly Apple’s experience with ASR’s when its share price was in an uptrend.