New NCEO Study on Repurchase Obligation

Privately held ESOP companies must repurchase their shares from departing employees. This "repurchase obligation" can be substantial. The employee-owned Peoria Journal Star Company, for instance, has had to put itself up for sale because it stock value has gone up beyond its capacity to repurchase the shares. A new NCEO survey of 85 randomly selected ESOP firms shows that 66% have done a repurchase study, but only 41% have a specific repurchase plan. Almost all the repurchasing is done through company cash flow (49%) and contributions to the ESOP (41%). All other methods, such as corporate owned life insurance (COLI) and debt, account for less than 10% combined.