Volume-weighted average price

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Statistics - market prices.

(VWAP).

A weighted average is a type of average, calculated using consistent appropriate weighting factors, for example volumes of assets or contracts traded.

Volume-weighted average price is an average price calculation, that uses volumes traded as the weighting factors.


Pricing options - share buybacks
"Some [equity share] buybacks are carried out for a fixed commission.
However, most UK buybacks incorporate some sort of incentive for the brokers to buy as many shares as possible within the set budget.


This ensures the company pays the lowest possible price for its shares.
At the end of the programme, the broker will calculate the average price per share the company has paid over the life of the programme and compare that to a benchmark price.


The benchmark price is usually the volume-weighted average price (VWAP) per share in the market for the period, sometimes with a discount applied.


[Share buyback] pricing models include:
(1) VWAP guarantee: the company always pays VWAP for the shares. A true-up payment is made at the end of the programme to cover the difference between actual amount paid and the VWAP price.
(2) A variation is sometimes seen, where the guaranteed price is a set discount to VWAP.
(3) Upside sharing: the company and the broker split the difference between VWAP (or discounted VWAP) and the actual cost of shares (again with a true-up payment at the end).
Share buybacks: what treasurers need to know - Lucy Reeve, corporate partner, Linklaters LLP - The Treasurer - Issue 4 of 2024, p38.


See also

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