Tender Offer
A tender offer is a public offer to buy shares directly from shareholders at a stated price, usually above the market price, for a limited time. It can come from an acquirer or from the company buying back its own stock.
A tender offer is a public bid to buy a large block of a company’s shares directly from shareholders, usually at a fixed price above market for a limited time. Acquirers and companies buying back their own stock both use it.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 3 min
- Also called
- Takeover bid, Public offer to purchase, Mini-tender (small variant)
- Updated
Tender offers in plain words
A tender offer is a broad, public bid by a company or outside buyer (the “bidder”) to buy a large share of a company's securities.1
It is open for a limited time and made to every shareholder individually.1
The price is usually above the market price, to encourage holders to sell.1
How a tender offer works
Bidder announces
A bidder solicits holders to sell a substantial percentage of the securities.1
Terms are set
Check the price — usually above the market.1
Conditions apply
Check for conditions, such as a minimum number of shares that must be tendered.1
Disclosure
In the US, bidders must disclose who they are and the terms, and file the offer documents with the SEC.2
You decide
Note the deadline — in the US, offers must stay open at least 20 business days.3
Check for mini-tenders
Be careful with offers for less than 5% of a company's shares; they come with fewer protections.2
Worked examples
Example 1 — Premium offer
25% premiumA hypothetical bidder offers $25 for shares trading at $20.
| Market price | $20 |
| Offer | $25 |
The price is at a premium to encourage security holders to sell.1
Example 2 — Minimum condition
Offer lapsesA hypothetical offer requires 5m shares tendered; only 4m come in.
| Required | 5m |
| Tendered | 4m |
Because the offer was conditioned on tendering a minimum number of securities, it can lapse.1
Example 3 — Mini-tender trap
AvoidA hypothetical unsolicited offer for 2% of a company pays below market.
| Stake sought | 2% |
| Price vs market | Below |
In mini-tenders, holders may be unable to withdraw and can end up selling below market value.2
Tender offer vs open-market buying
| Aspect | Tender offer | Open-market purchases |
|---|---|---|
| Price | Fixed, often premium | Market price |
| Time limit | Yes | No |
| Disclosure | Formal offer documents | Ownership filings |
| Who can sell | All holders | Whoever trades |
Where tender offers are used
Takeovers
Buy control of a target’s Market Capitalisation.
Buybacks
Companies repurchase their own shares, supporting Earnings per Share.
Merger arbitrage
Trade the spread as a Trading Strategy.
Event risk
Offers cause Price Gap moves.
Advantages and disadvantages
Advantages
- Often pays a premium.
- Fixed terms are clear.
- Formal disclosure in larger offers.
Disadvantages
- Conditions can cancel the deal.
- Mini-tenders may pay below market.
- Tax may be due on gains.
- Rules differ by country.
Going deeper
Read as far as you need. Each level builds on the one before it.
Basics
Beginner
It is a wide, active solicitation to buy a large stake in a company.1
Protections
Intermediate
US rules require disclosure and SEC filings, but offers for under 5% of the shares carry fewer protections.2
Decisions
Advanced
In mini-tenders, holders may not be able to withdraw and may sell below market.2 Takeover and securities law differs by country.
Common mistakes
Not comparing with market price
Some offers are below it.
Missing the deadline
Offers expire.
Ignoring conditions
Minimums can sink the deal.
Forgetting tax
Selling can trigger capital gains tax.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A tender offer is a public bid to buy shares.
- It is time-limited.
- It usually carries a premium.
- Conditions may apply.
- Mini-tenders need extra care.
Frequently asked questions
Must I tender?
Can I withdraw?
Is a tender offer a buyback?
Further learning
- Market Capitalisation
What buyers pay for.
- Capital Gains Tax
Tax on tendering.
- Price Gap
Price jumps on offers.
- Earnings per Share
Buyback effects.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Tender Offer (opens in a new tab) Checked .
- SEC. Mini-Tender Offers: Tips for Investors (opens in a new tab) Checked .
- Electronic Code of Federal Regulations (eCFR). 17 CFR 240.14e-1 – Unlawful tender offer practices (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.