Editor’s note: This is general educational information about the two routes a US-listed company can take to retire its own shares. It is not investment advice. It draws on the Securities and Exchange Commission rules and the tender offer filings listed at the end.
A share count can shrink in two ways, and the choice between them is a choice about law, not about arithmetic. One route is a standing instruction to a broker: buy stock most days, in modest size, at whatever the market is quoting, for as long as the board’s authorization lasts. The other is a formal offer with a printed price range, a stated dollar cap, an expiration time to the minute, and a filing with the SEC that opens the company to a body of takeover rules written for hostile bidders two generations ago.
Both end with treasury shares. Almost nothing else about them matches.
The open-market route runs inside a safe harbor
Buying your own stock in the open market raises an obvious problem: the buyer knows more than anyone else about the issuer and can push the price around. The Commission’s answer since 1982 has been Rule 10b-18, a safe harbor rather than a prohibition. A company that stays inside its four conditions on a given day is not deemed to have manipulated the price of its own security by reason of the manner, timing, price, or volume of those purchases.
The four conditions are cumulative. Failure to meet any one of them, as the Commission put it when it modernized the rule, “will disqualify the issuer’s purchases from the safe harbor for that day.” The manner condition requires a single broker or dealer per day for solicited purchases, so that the issuer’s own bidding cannot be made to look like broad demand. The timing condition keeps the issuer out of the opening print and out of the closing stretch, because trading at those moments is read by everyone else as a signal about direction and strength of demand. The price condition caps the issuer at the higher of the highest independent bid or the last independent transaction price. The volume condition limits the issuer to 25% of the average daily trading volume in its shares.
That last number is the binding one in practice, and it explains the pace. A company whose stock turns over lightly can only retire a small slice per session. The rule does carve out blocks, defined as a quantity of stock with a purchase price of $200,000 or more, or at least 5,000 shares with a purchase price of at least $50,000, or at least 20 round lots amounting to 150 percent or more of that day’s trading volume. The 2003 amendments, adopted on November 17, 2003, folded block purchases into both the ADTV calculation and the 25% limit, tightened the price test into a single uniform standard, and required issuers to disclose all repurchases in their periodic reports whether or not the trades were made inside the safe harbor.
The safe harbor is voluntary. Purchases made outside it are not automatically unlawful; they simply lose the presumption, and the issuer carries the manipulation question itself.
The tender offer route runs inside the takeover rules
An issuer that wants a large block at once cannot get there at 25% of daily volume without months of buying and a rising price. So it files. An issuer self-tender is governed by Section 13(e) of the Securities Exchange Act and its rules, and by Section 14(e) and Regulation 14E, which apply to every tender offer regardless of who is bidding.
The consequences for shareholders are procedural and specific. A bidder for more than five percent of a company’s shares must disclose information about itself, disclose the terms of the offer, file its offering documents with the SEC, and give the target and any competing bidders information about the offer. Holders in turn get three protections that open-market buying cannot provide: the right to change their minds and withdraw while the offer remains open, acceptance on a pro rata basis if the offer is oversubscribed, and equal treatment by the bidder.
Below that five percent line sits the mini-tender, which escapes almost all of it. The Commission’s own investor publication warns that mini-tender offers “typically do not provide the same disclosure and procedural protections that larger, traditional tender offers provide”, that holders generally cannot withdraw once tendered, and that the bidder can extend the offer without granting withdrawal rights. Only the anti-fraud provisions of Section 14(e) and the minimum open periods of Regulation 14E still bite.
What the mechanism looked like in practice this year
Two 2026 self-tenders show the structure working. Scholastic Corporation announced on March 23, 2026 a modified Dutch auction for up to $200 million of its common stock at a price not less than $36.00 nor more than $40.00 per share. The last full trading day before commencement, March 20, 2026, closed at $37.25. At the low end of the range the offer would have taken roughly 25% of the shares outstanding. It expired on April 20, 2026, and the final count, announced April 23, 2026, was 2,834,018 shares tendered at or below the clearing price of $40.00, all of which the company accepted, for an aggregate cost of $113,360,720 and about 13.7% of shares outstanding.
Wix.com Ltd. ran the same structure at a different scale. Its offer, commenced March 5, 2026, sought up to $1,750,000,000 of ordinary shares at not more than $92.00 nor less than $80.00, against a March 4, 2026 close of $83.78. When it expired on April 1, 2026, holders had tendered 17,577,250 shares at or below $92.00, all accepted, for roughly $1.617 billion and approximately 29.7% of shares outstanding.
Analysis: the auction clears where the seller sets the reserve, not where the buyer wants
Both of these offers cleared at the very top of the stated range, and that is the part worth sitting with. In a modified Dutch auction the company names a band and holders name their price inside it; the company then pays the lowest price that fills the requested amount, and everyone accepted is paid that same price. The design is meant to discover a clearing level. What it discovered in both cases was the ceiling.
That result is informative in a narrow way. It says the marginal seller would not part with stock below the top of the band, even though Scholastic’s band straddled the prior close, opening below it at $36.00 and above it at $40.00. It does not say the shares are worth $40.00, and it does not say the board’s price range was set too low. A clearing price at the ceiling can equally mean the holders willing to sell were few, which is what Scholastic’s outcome implies: the company had authorized up to $200 million and bought $113,360,720 of stock. An undersubscribed auction at the maximum price is a different signal from an oversubscribed one at the maximum price, and only the second forces proration. Wix’s offer, by contrast, retired close to 30% of the share count in a single settlement.
The comparison with the open-market route is the useful frame. Rule 10b-18 buying is price-taking by construction: the issuer may not bid above the highest independent bid, cannot lead, and is capped at a quarter of the day’s volume. A self-tender inverts that. The company sets a price above the market, publishes the fact, and accepts that it will pay a premium for speed and certainty of size. Neither is cheaper in any general sense. The tender offer buys a known quantity at a known cost on a known date, and the open-market program buys an unknown quantity at an unknown average price over an unknown period, with the option to stop.
A careful reader comparing two repurchase announcements would therefore look at three things the headline dollar figure does not show: whether the offer was subscribed to its cap, where the clearing price sat within the band, and what percentage of shares outstanding was actually retired. Those three facts, all of which appear in the final results release, describe the transaction. The authorized amount does not.
