Matthews South advised a large-cap technology company on its first Enhanced Open Market Repurchase (“eOMR”). The eOMR is an open market program intended to maximize the discount to VWAP. The program does this by using an algorithm to determine the daily purchases.
Matthews South provides the “low cost” eOMR by using its own software algorithm to create the daily grid instructions for the open-market broker. This service is included as part of our standard share repurchase advisory engagement. Unlike the typical industry commission of 25% of the VWAP beat, with the “low cost” eOMR, the issuer only pays the broker its normal OMR commission. For the typical eOMR program, this equates to a 90%+ cost reduction.
The eOMR can be an interesting solution for many issuers. It has the flexibility and simplicity of traditional 10b-18 or 10b5-1 programs, while capturing VWAP economics commensurate with ASRs. The eOMR can be terminated at any time and customized to include limit prices, variable sizes, and more. The eOMR is especially interesting in the current market as the program tends to outperform in high volatility environments.