2006-08-28 05:23:07 · 6 answers · asked by carol m 1 in Business & Finance ➔ Investing
Typically, when one company buys up stock of another company, the bidding company makes what is called a "tender offer." Tender in this case does not mean its edible. Tender simply means the offer is made by the bidding company and its up to the potential seller (the stockholders and the company) of the stock to accept or reject the offer.
You benefit in most cases because the tender offer is usually some percentage above the going market price of the stock. In a recent tender offer I took part in, the tender offer was 15% above the market price.
Of course, if the tender offer price is still below the amount paid out for the stock you own, you would not benefit. You would take a loss if you used your own money to buy that stock. Frequently, however, through employee stock plans, the company buys the stock for you. In which case, you'd lose none of your own cash.
When a tender offer is made, current stock holders are notified and given the option to sell or not at the tender offer price. One often hears in the news where stockholders turned down a tender offer; they may be holding out for a higher bid or they may just want to hold onto their company's ownership.
Bottom line, if the tender offer is higher than what you personally paid out for the stock, you profit (minus taxes). Otherwise, you lose money.
2006-08-28 05:41:28 · answer #1 · answered by oldprof 7 · 0⤊ 0⤋
More often than not the acquiring company purchases the outstanding shares of stock of the other company at a premium to the current market value. Sometimes this is a very significant increase in the market value. Other times it is very close to the market value.
2006-08-28 06:48:36 · answer #2 · answered by Adios 5 · 0⤊ 0⤋
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2006-08-28 13:18:53 · answer #3 · answered by stock_trade_expert 3 · 0⤊ 0⤋
Depending on what the market thinks of the buy-out, the stock price may increase.
2006-08-28 05:35:57 · answer #4 · answered by Robin A. 3 · 0⤊ 0⤋
Typically, acquirers overpay, so you receive compensation (cash or stock in the acquiring company) that is more valuable than the stock you hold in the company being acquired.
2006-08-28 05:45:49 · answer #5 · answered by NC 7 · 0⤊ 0⤋
Because the company who is buying is usually offering you more than it would sell for right now..
2006-08-28 05:28:22 · answer #6 · answered by onelonevoice 5 · 0⤊ 0⤋