Contrast the ways a firm can buy back shares
The idea
Companies buy back shares in four main ways. Open market purchases are the most common, flexible and cheapest, but slow, and the company cannot know in advance how many shares it will get. A fixed-price tender offer names a price, usually at a premium, and a number of shares, and can be completed quickly. A Dutch auction invites tenders within a price range; the company pays the lowest price at which enough shares are offered to fill its order, and pays that price to all accepted tenders. Direct negotiation buys a block from a particular holder, sometimes at a premium. The trap is paying the highest tender price, or the lowest, in a Dutch auction.
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