Can the method of making a share repurchase create a regulatory and governance paradox? In this article, we argue that it can. One increasingly popular mechanism, the accelerated share repurchase (ASR), can at sufficient scale, distort market prices, force the issuer to settle at temporarily inflated levels, and erode long-term shareholder value—all while complying with the technical requirements of Rule 10b-18’s safe harbor for market manipulation enforcement.

The mechanics are straightforward. An ASR is, in effect, a forward transaction: At initiation the company pays the full value up front—typically based on the prevailing market price—and in return receives the majority of the intended shares from a counterparty bank, which the company typically retires immediately. The final price of these shares (after what is called a true-up) is contractually set to be the average of daily volume-weighted prices over the buyback period, minus a pre-agreed discount. To deliver the upfront block of shares, the bank borrows the shares from stock lenders, then buys them back in the open market over the contract’s life to cover its short position and meet the true-up.

At small size—say, 2.5% of market capitalization—an ASR is absorbed into the market and looks like a mechanical variant of an open-market buyback. At large size, the dynamics change. The immediate retirement of a substantial block shrinks the free float precisely when shares are most in demand to support short interest and hedging. Stock-lending supply tightens, borrowing costs rise, and the banks’ obligation to cover large short positions within a defined timeframe becomes a predictable source of one-sided directional order flow. In combination, these features replicate the classic ingredients of a short squeeze: positive news, reduced supply, higher funding costs for existing shorts, and a large, persistent buyer that the market cannot ignore. Each day’s executions may comply with the price, timing, and volume conditions of the Rule 10b-18 safe harbor;[1] however, the safe harbor was never designed to limit the cumulative buying pressure that builds as a very large program persists over long time periods.

Our article demonstrates these dynamics through a case study of General Motors’ November 2023 ASR. The program was remarkable in scale: $10 billion, roughly 25% of GM’s market capitalization at announcement, uncollared, and split across four banks. To make the upfront delivery, the banks collectively borrowed and delivered approximately 215 million shares—about 16% of GM’s shares outstanding. GM retired them immediately, so the open short positions rose to about 20% of the remaining shares. Over the following 12 months the banks spent $10 billion buying stock to cover, while GM itself also purchased a further $7 billion of their shares from the open market, about half of this money spent concurrently with the ASR period. Altogether, issuer-related buying retired roughly 28% of the initial share count, whilst spending roughly 42% worth of the value of GM initial market cap in about 12 months. GM’s stock outperformed Ford—which was not actively repurchasing—by approximately 100% over the period. The ASR ultimately delivered about 243 million shares against the $10 billion commitment, implying an average purchase price of roughly $41 per share, a 42% premium to the pre-announcement closing price, which for context is higher than most M&A control premiums.[2] A buyback via a tender offer would have required the company’s board to substantiate any abnormally high premium through careful valuation. ASRs require no equivalent discipline.

The price impact was not necessarily unwelcome. GM’s chief financial officer, speaking shortly after completion, contrasted the ASR with a plain open-market authorization of the same value: With an ASR, “you write the check” and so the market has near certainty all the money will be spent within the specified timeframe—making it, in his words, “far more impactful”. [3]

We do not contend that this implies improper intent. But we highlight the potential that execution structures may be marketed to, and chosen by, management precisely because of the immediate upward price pressure they can create—pressure that directly conflicts with the interest of the company’s long-term shareholders, who are orientated towards a lower purchase price, enabling the company to buy more and retire more shares for the fixed sum of committed capital.

Current regulation has not addressed this corporate governance concern. Unlike the EU, where shareholders must pre-approve buyback programs, including maximum size, duration, and price range, [4]  U.S. law does not require any shareholder vote. The mandatory cooling-off periods the SEC introduced in 2022 for directors’ and officers’ 10b5-1 plans do not extend to issuer repurchases, and the SEC’s 2021 proposal to that effect was dropped after industry pushback. [5]  ASRs face far lighter initiation requirements than tender offers, which also retire shares immediately but trigger Schedule TO disclosure, minimum offer periods, and post-offer purchase blackouts.[6] Unsurprisingly, the ratio of ASRs to tender offers ranged from 2.7 to 17 times between 2018 and 2025, trending higher. Issuers remain free to run open-market repurchases concurrently with an outstanding ASR, as GM, Apple, and other companies have done.[7] Any accountability is minimal: Delaware’s business judgment rule and demanding books-and-records standards make fiduciary claims over poorly designed ASRs nearly impossible to sustain, while Rule 10b-5 manipulation claims founder on scienter. Savvy management can launch a 10b-18-compliant ASR and benefit from the resulting squeeze without ever creating the evidence of intent a complaint requires.

We propose measures for deliberation rather than prohibition. First, shareholder oversight along EU lines: approval of the overall scale, timeframe, and a permissible price range, without requiring pre-approval of specific contracts. Second, a size cap on the cumulative annual scale of open-market and ASR programs, as several EU member states already codify, with tender offers and Dutch auctions excluded, given their stronger governance processes. Third, structural restraints: a mandatory pause between large consecutive repurchases and discouraging simultaneous, large programs—for instance by withholding the Rule 10b5-1(c) safe harbor, as the SEC has already done for overlapping insider trading plans. [8] Fourth, a documented paper trail: Boards should attest in Form 8-K filings that ASR risks and mitigating factors were evaluated, with the underlying assessments attached to board minutes and thereby accessible to shareholders.

Our deeper point returns to the Miller-Modigliani Dividend Irrelevance Theorem.[9] Dividends reach all shareholders proportionally; repurchase capital reaches only those who sell and leave the register, while remaining shareholders benefit through increased ownership. That asymmetry poses an important governance question that boards, courts, and regulators have yet to confront squarely: Is management’s fiduciary obligation to maximize the number of shares retired for a given capital outlay, or to drive short-term price gains that reduce share retirements? ASRs sharpen this tension and invite sensible governance, controls, and processes so that capital allocation remains aligned with long-term shareholder value creation rather than short-term share price engineering. Our proposals may be useful starting points.

ENDNOTES

[1] 17 C.F.R. §240.10b-18 (2025).

[2] General Motors Shares Outstanding 2012-2025 | GM, Macrotrends, https://www.macrotrends.net/stocks/charts/GM/general-motors/shares-outstanding [perma.cc/A5ZA-GWKT]; Stock Information, Gen. Motors Investor Rels., https://investor.gm.com/shareholders/stock-information[perma.cc/DTX2-AL36]; General Motors Co., Annual Report (Form 10-K) 26 (2024), https://investor.gm.com/static-files/e86cba95-5077-4097-bf21-b3de40126ca8 [perma.cc/44KJ-ZYP8].

[3] General Motors Company (GM): Barclays 15th Annual Global Automotive and Mobility Tech Conference, Seeking Alpha, https://seekingalpha.com/article/4739135-general-motors-company-gm-barclays-15th-annual-global-automotive-and-mobility-tech-conference[perma.cc/3YF9-3VLZ].

[4] Council Directive 2012/30/EU, art. 21, 2012 O.J. (L 315) 87.

[5] Insider Trading Arrangements and Related Disclosures, Securities Act Release No. 33-11138, Exchange Act Release No. 34-96492, 87 Fed. Reg. 73,238, 73,244, 73257 (Dec. 29, 2022).  

[6] 17 C.F.R. § 240. 13e and 14e (2026).

[7] GM Board Approves New $6 Billion Share Repurchase Authorization, PR Newswire,

https://www.prnewswire.com/news-releases/gm-board-approves-new-6-billion-share-repurchase-authorization-302169391.html[perma.cc/6HX8-UZ25]; Apple Inc., Annual Report (Form 10-K) (Oct. 31, 2019), at 48, Note 7 (Share Repurchase Program), https://www.sec.gov/Archives/edgar/data/320193/000032019319000119/0000320193-19-000119-index.htm [perma.cc/4JEW-VQN2] (“During 2019, the Company repurchased 345.2 million shares of its common stock for $67.1 billion, including 62.0 million shares delivered under a $12.0 billion accelerated share repurchase arrangement dated February 2019, which settled in August 2019”).

[8] Insider Trading Release, 87 Fed. Reg. at 73,290.

[9] Merton H. Miller & Franco Modigliani, Dividend Policy, Growth, and the Valuation of Shares, 34 J. Bus. 411 (1961).

 Lynn Bai is a professor at the University of Cincinnati’s Donald P. Klekamp College of Law, and Michael Seigne is founder of Candor Partners Limited, a London-based share-buyback execution advisory firm.