These are the typical words that we hear every year on the news, on the internet, etc. These concepts are easy to understand, although in practice, analysing a takeover bid in depth and acting in the most profitable way with our money is somewhat more complex.
Equity products such as shares involve a high risk if you do not have the necessary knowledge. The first thing before investing is to educate yourself well and, if not, to contract more basic and conservative products such as savings and investment insurance where your capital is guaranteed. If you want us to inform you, contact us.
The tender offer and how they work.
A tender offer is a company’s tool for buying part or all of its shares from current shareholders. To do this, the company informs current shareholders that it wants to buy their shares by making it public. At the same time, all the details of the transaction are also made public, such as the deadline that shareholders have to sell their shares to the company, the price at which they can do so (it is a fixed price) and the number of shares they want to buy. We can often find the term OPA (public acquisition offer), which is exactly the same as a tender offer, only in Spanish.
The operation of a tender offer is quite simple to understand. It all starts when company X wants to buy company Y, either in full or in part, and then makes public the offer and its characteristics (term, price and quantity). After this, the shareholders have the published term to decide whether to accept (sell) at the price that has been offered to them. It may be that the company that is bidding (buying) does not reach the number of shares it wants within the term, and may cancel the tender offer and extend the term, as they see fit.
What is a tender offer used for?
They are usually used (apart from cases where the law requires it) because if the company tried to buy the shares on the market, the price would end up rising a lot, since it would greatly increase the demand for shares. Especially in small companies, this effect can be very harmful for buyers, since in many cases there is not even enough liquidity in the market to be able to buy the amount of shares they want. Through a tender, you can buy a large block of shares without raising the price too much, offering a closed price slightly above the market.
In the next article about the tender offer we will explain the types of tender that exist, you can see it here.
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