What is an accelerated share repurchase (ASR) agreement?

An accelerated share repurchase (ASR) is a contract between a company and a financial institution, typically an investment bank, where the company agrees to buy back a significant amount of its own stock. The bank often buys shares on the open market and delivers them to the company. This method allows for the immediate repurchase of a large block of shares, often at a potentially favorable average price.

Why would Synopsys enter into an ASR agreement?

Companies typically enter into ASR agreements for several reasons. It can signal management's belief that the company's stock is undervalued, demonstrate confidence in future performance, and efficiently return capital to shareholders. It can also be used to offset dilution from stock options or grants.

What is the financial impact of this $125 million ASR on Synopsys?

Financially, the $125 million ASR will reduce the number of outstanding shares of Synopsys common stock. This reduction, assuming the company's net income remains constant, will likely lead to an increase in earnings per share (EPS). It also reduces the company's cash reserves by $125 million, which could impact future investment or dividend capacity.

When will the share repurchase be completed?

While the agreement was announced on May 24, 2016, the press release indicates entry into the agreement. The exact timing and completion of the repurchases under an ASR are typically executed by the financial institution over a defined period, often within a few months, but the filing doesn't specify an exact completion date.

SNPS 8-K SEC Disclosure

Summary

Synopsys, Inc. (SNPS) announced on May 24, 2016, its intention to repurchase a significant amount of its own common stock through an accelerated share repurchase (ASR) agreement. The company entered into this agreement with JPMorgan Chase Bank, National Association, for an aggregate value of $125 million. This move signals management's confidence in the company's financial position and its stock valuation. An accelerated share repurchase allows a company to immediately buy back a substantial number of shares, often indicating a belief that the stock is undervalued or as a way to return capital to shareholders efficiently. Investors should monitor the impact of this buyback program on future earnings per share and overall shareholder returns.

Key Highlights

1Synopsys entered into an accelerated share repurchase (ASR) agreement valued at $125 million.
2The ASR agreement is with JPMorgan Chase Bank, National Association.
3The company intends to repurchase its common stock through this agreement.
4This announcement was made via a press release filed with the SEC on May 24, 2016.
5The filing is an 8-K report, indicating a material event.
6The event date reported is May 23, 2016.

SYNOPSYS INC 8-K Report, Corporate Update (May 24, 2016)

Summary

Key Highlights

Frequently Asked Questions