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Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Oddlot buyback/round-up programs

Long-term readers know that these programs have long been something of a mania with us. We hate waste - and we hate to see money wasted on servicing share-holders, and on ‘shareholder accounts’, and on making mailings to people who have no material stake in the company that’s paying all the bills.

But we hate it even more when we see odd-lot buyback programs that are so badly designed that the benefits to the agents outstrip the benefits to the corporate sponsor...or that leave the biggest savings on the table.

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We are especially peeved when odd-lot programs are designed so the “middling holders” end up subsidizing the deals...even while the really small holders – the ones you most want to get rid of – continue to sit on their hands.

And we are infuriated when small shareholders aren’t informed that sometimes they can simply cash out for nothing, or for next to nothing, through an existing DRP, or through the “Direct Registration System.” Not just dumb, but a shamefully shabby trick.

A lot of companies have been burned on badly designed programs that were not worth their time and trouble. But readers, most companies whose shareholder records we review would benefit hugely from a cleanup program that would eliminate those costly “cling-ons.”

Our advice: Do some homework first. Read some of the articles about small-shareholder buyback programs that are on our website.

Carefully consider targeting only the truly immaterial holders for your next odd-lot program – and keep your program simple. (In the old days we used to like those buy-back/round-up programs – and we liked those charitable donation options too. But now we say, limit the choices to three at most: Cash Out, Donate, or Do Nothing.

Do the math with care, and consider picking up all the processing fees and brokerage commissions yourselves: You will usually break-even in the first year if you design the program properly – and realize true savings each year for 16 years or more, which is the average account-life of a 1-to-5-share shareholder!

Currently, we have no recommended suppliers, but please feel free to contact the editors if you would like additional background information and a few names to investigate.