Kansas City-based tax preparation company H&R Block was the biggest gainer Wednesday in the Standard & Poor’s 500, rising $2.47, or 7.5 percent, to $35.42. On Tuesday, the company reported a smaller-than-expected loss and announced a $3.5 billion stock buyback program.
Analyst Mark Palmer of BTIG Research told clients in a note that the buyback offer was larger than investors had been expecting. He also noted that Block executives remained mum about any plans to boost the stock’s dividend.
Block released buyback details Wednesday, in a filing with the Securities and Exchange Commission, for a “modified Dutch auction” tender offer that marks the first stage of the plan. Block will buy back as much as $1.5 billion of its own shares during the monthlong auction. It will pay between $32.25 and $37 a share in the initial and unusual buyback program.
In the Dutch auction, Block shareholders will be able to offer their shares back to the company and set the price at which Block would buy them, as long as the price is between the range the company set.
Block would then accept enough of the offered shares as it needed to reach its targeted $1.5 billion repurchase. All shares purchased, however, would receive the same price. The purchase price would be set at the price Block would need to accept to meet its target. Investors also can offer their shares at that unspecified purchase price to be determined by the auction process.
The offer comes after Block completed the sale of its bank, H&R Block Bank, which removed the company from federal oversight as a bank holding company. That freed up capital Block was required to keep on hand for the bank.
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