tender offer
A public offer to purchase shares directly from shareholders at a premium price, used in acquisitions or buybacks, bypassing the board of directors.
Example
“The acquirer launched a tender offer at $45 per share — a 30% premium — directly to shareholders after the board rejected their approach.”
Memory Tip
TENDER OFFER = offer to buy shares directly FROM shareholders. Premium price, bypasses board.
Why It Matters
A tender offer can significantly impact shareholders if they own stock in a company being acquired or doing a buyback. Understanding this mechanism helps individual investors know their rights to sell shares at a premium price and make informed decisions about whether to participate in the offer.
Common Misconception
Many people mistakenly believe that shareholders must accept a tender offer or that the company board can force them to sell their shares. In reality, tender offers are voluntary, and shareholders can choose whether to participate or hold onto their shares.
In Practice
In 2013, Microsoft launched a tender offer to buy back shares at $37.04 per share when the market price was trading lower. Shareholders who believed in the company could either accept the premium price and sell their shares, or decline the offer and keep their stock, hoping for future appreciation.
Etymology
TENDER (to offer formally) OFFER. A formal OFFER to which shareholders can TENDER (submit) their shares.
Common Misspellings
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