Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Tender Offer

What it is:

A tender offer is a proposal by an investor to all current shareholders of a publicly traded corporation to tender their shares for sale at a certain price at a certain time. 

How it works (Example):

The prospective acquirer typically offers a higher price per share than the corporation's stock price. This provides shareholders with a greater incentive to unload their shares. For example, if a stock's current price is $10/share, someone wishing to take over the company might issue a tender offer for $12/share on the condition that he can acquire at least 51% of the shares. 

Why it Matters:

Tender offers can be executed without the consent of the company's board of directors. The potential acquirer can work directly with shareholders to takeover the company. Sometimes this is referred to as a "hostile takeover."