Tender Offer
A tender offer is a public offer to security holders to sell securities to a bidder on stated terms during a defined period.
Basic example
A bidder offers:
$30 per share
for up to:
20 million shares
of a company trading around:
$25
Shareholders decide individually whether to tender.
The premium is intended to encourage participation.
Tender offer vs. ordinary market sale
Ordinary sale:
- investor sells in the market
- price changes continuously
- buyer is not necessarily known
Tender:
- bidder specifies terms
- offer remains open for a stated period
- holders submit shares into the offer
The transaction is organized around one bidder.
Third-party tender
An acquirer can use a tender offer to buy enough shares to gain control of a target.
If successful, it can be followed by a merger or other transaction.
The offer documents describe:
- price
- conditions
- financing
- expiration
- withdrawal rights
Issuer tender offer
A company can also tender for its own shares.
That is a form of share repurchase.
Unlike open-market buybacks, the company makes a formal offer to holders under defined terms.
SEC protections
Investor.gov notes that tender-offer rules can include:
- minimum offer periods
- withdrawal rights
- all-holders requirements
- best-price protections.[1]
These protections are designed to make the process more orderly and fair.
Schedule TO
Many tender offers require a Schedule TO.
The filing can include:
- offer terms
- bidder identity
- transaction purpose
- financing
- conditions
Investors should read the actual filing rather than relying on the announcement headline.
Proration
If more shares are tendered than the bidder wants to buy:
the offer can be prorated.
An investor who tenders 1,000 shares might have only a portion accepted.
The offer terms determine the allocation.
Conditional offers
A bidder can require:
- minimum shares tendered
- regulatory approvals
- financing conditions
A quoted premium does not guarantee the transaction closes.
Mini-tender offers
Investor.gov notes that some offers seek 5% or less of outstanding shares and are known as mini-tender offers.[1]
Investors should pay close attention to price and terms because some mini-tenders can be below market value.
Common mistakes
"Tendering guarantees every share will be purchased."
No.
"Tender offers always come from acquirers."
Issuers can tender for their own stock.
"A premium guarantees the deal closes."
No.
"Tender offer means market order."
No.
Example
A bidder offering $30 for a stock trading near $25 may accept only a prorated portion if holders tender more shares than requested.
Professional note
Read the Schedule TO or offer-to-purchase document. Compare offer price with market price, identify conditions, withdrawal rights, proration and financing. A headline premium is only one part of the decision.
Related terms
- Common Stock
Common stock represents an ownership interest in a corporation and generally carries a residual claim after creditors and senior securities.
- Shares Outstanding
Shares outstanding are issued shares currently held outside the issuing company, excluding shares held in treasury.
- Share Repurchase
A share repurchase occurs when a company buys back its own shares through open-market purchases, tender offers or other permitted transactions.
- Public Float
Public float generally refers to shares or market value held by public investors rather than affiliates under the applicable definition.
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