Posted in Finance, Accounting and Economics Terms, Total Reads: 91
Definition: Short Tender
Short Tender is a situation that occurs when an investor tries to make money during an acquisition or a hostile takeover. Although this practiced is barred by the Securities Exchange Commission, an investor can borrow shares to sell normally but this cannot be done during a tender offer.
The concept of Short Tender can be explained as a situation in which an investor borrows shares to sell it at a premium that is being offered during an acquisition. An investor who has that many amount of shares in the company usually responds to the tender offer and sells them at the premium. The acquiring party gets the controlling stake and the previous management loses the control of the company. This practice is strictly barred by the SEC but behind closed doors these tender offers take place.
A significant reference of the above is made in the movie called ‘Other People’s Money’ in which a hostile takeover is facilitated by a tender offer made by the acquiring party to a shareholder who holds the required amount of shares in the company.