Glossary
Tender offer
A public offer to buy shares directly from a company’s shareholders at a set price, usually a premium, within a limited window.
On this page
A tender offer is a public invitation to a company's shareholders to sell ("tender") their shares at a stated price during a fixed period. The buyer can be an outside company seeking control, an activist, or the company itself buying back its own stock. The price is usually set above the market to persuade holders to sell, so tender offers can move a stock sharply and force every holder to make a decision.
How it works
The offer names the price, the number of shares sought, any conditions (often a minimum share count or regulatory approval) and an expiration date. In the US, SEC rules require a tender offer to stay open for at least 20 business days, and to be extended if the price or the share count sought changes. Shareholders who tender can generally withdraw while the offer remains open. If more shares are tendered than the buyer wants, purchases are usually made pro rata.
In a Dutch auction self-tender, a company names a price range and shareholders say how many shares they would sell at which price; the company then pays the lowest single price that lets it buy the amount it wants.
What to consider
Tender offers can be friendly or hostile, meaning made over the objections of the target's board. The target's board must publish its position on the offer, usually within 10 business days. Tendering in cash is generally a taxable sale. Holders who do not tender may later be squeezed out in a follow-on merger at the same price, or left in a less liquid stock.