Dutch Auction Self-Tenders

Rather than announce a fixed buyback price, a company running a Dutch auction self-tender asks shareholders to submit the price at which they'd be willing to sell, within a stated range, along with how many shares. The company then ranks all the offers from lowest to highest price and fills them in that order until it has bought the number of shares it wants — but every seller who tenders at or below that final "clearing price" is paid the same clearing price, not their own bid.

Worked example. A company wants to buy back 10 million shares and sets a range of $40–$50. Shareholders tender shares at various prices within that band: 2 million shares at $42, 3 million at $45, 4 million at $47, and 3 million at $49. Stacking from the lowest price up, $42 + $45 + $47 tenders total 9 million shares — not quite enough — so the company must reach into the $49 tier to fill the remaining 1 million shares. The clearing price is therefore $49, and everyone who tendered at $49 or below, including the $42 and $45 sellers, receives $49 per share.

This design avoids the risk of a fixed-price offer being set too low (undersubscribed) or too high (overpaying), since the auction lets aggregate shareholder demand set the price. It is commonly used when management believes shares are undervalued but is unsure exactly how much shareholders would need to be paid to part with a large block at once.