Placing a Bid to Own a Public Company

A tender offer is a bid to purchase some or all the shares in a corporation. Most often they’re a public invitation for shareholders to sell their positions to the bidding party, at a specified price, within a set timeframe.  As an inducement, the price offered is generally higher than the current market price. The offer is most often contingent upon a minimum number of shares tendered, for example 51% of outstanding to allow control.

A common variation of this is an exchange offer. This is a non-cash type of tender offer in which securities or other non-cash alternatives are offered in exchange for shares. When one company acquires another, it often does a share exchange in an exchange offer tender.

A publicly traded company may present a tender offer for its own publicly held shares to either take themselves private or to reduce shares in public hands and increase those in the corporate treasury.

Tender offers to acquire a company without the Board of Directors’ approval can be considered a hostile takeover. Hostile takeover acquisitions in the past have included hedge funds, private equity firms, management-led investor groups, SPACs, and more recently a wealthy entrepreneur (Elon Musk).

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