A Dutch Auction is an offer to buy back shares for cash. Dutch Auctions are shareholder self-tenders which should be used almost exclusively in non-hostile environments. Laurel Hill Advisory's voluntary programs allow shareholders who wish to sell their shares to select a price from among a range of prices set by the issuer. The “auction” is controlled by the issuer, who selects the lowest priced offers to fulfill the amount of the total stated buy-back. If there are not enough shares offered at the lowest price to accomplish the desired buy-back, the issuer may accept offers from the next higher priced tier. However, all tendered shares that are accepted receive one price
Dutch Auctions are a proven, effective buy-back vehicle for companies whose securities are not broadly traded.
When your own company stock is the best investment
A successful Dutch Auction starts with a plan generated in partnership with the issuer, its legal counsel, and the combination of a Dealer Manager, Information Agent and Depositary.
Candidates for a Dutch Auction often share the following characteristics:
- Accumulated excess cash (for example, from a recent sale of assets) or a steady cash flow,
- Stock that is currently under-priced, yet showing strong revenue and earnings growth, a situation that could be a result of under-coverage by the investment community,
- Low daily trading volume, favoring a structured offer rather than open market purchases to ensure market and price stability,
- Presence in a sector which is suffering under general market pressure,
- The desire to reduce small (also referred to as “Odd Lot”) shareholders through the buy-back
Laurel Hill is equipped to offer the capability to plan and deliver a Dutch Auction in its entirety.
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