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Tender

A tender is a formal offer to purchase a specified quantity of shares or bonds at a predetermined price. Tenders are often used in corporate finance for buybacks, mergers, or acquisitions, where a company or investor invites shareholders to sell their holdings at a premium over the current market price. The offer is typically open for a limited period, during which investors can choose to accept or reject the terms.

Example

A company initiates a tender offer to buy back 1 million of its own shares at a price 10% above the current market price, giving shareholders an incentive to sell their shares back to the company.

Key points

• A formal offer to buy shares or bonds at a specific price, often at a premium.

• Common in share buybacks, mergers, or acquisitions.

• Typically open for a limited time, allowing shareholders to accept or reject the offer.

Quick Answers to Curious Questions

Companies use tenders to repurchase shares, often to reduce outstanding shares, increase share value, or consolidate ownership.

A tender offer is a formal offer to buy a large quantity of shares at a set price, often at a premium, while regular stock purchases occur through the open market at current prices.

A tender offer usually boosts the stock price, as the offered premium signals confidence in the company’s value and future prospects.