hedged tender

Hedged Tender

A strategy in a tender offer where an investor short sells a portion of the shares they own. This is to protect against the risk of loss in the event that the tender offer does not go through.

Notes:

For example, imagine a stock was trading at $30, and there was a tender offer for $40 per share. A hedged tender would attempt to lock in the $40 per share even if the offer does not go through.

See also: Hedge, Short Sale, Tender, Tender Offer

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Hedged tender

An investor sells a portion of a stock holding short a tender offer in the event all shares tendered are not accepted. For example, investor Q has 5000 shares of XYZ. An acquiring company makes a tender offer of $100 a share when the shares are currently worth $80. Investor Q short-sells 2500 shares after the announcement and the price of the stock has approached $100. Company XYZ purchases only 2500 of the original shares at $100. Investor Q has sold all shares at $100 even as the price of the stock drops on a post-news dip.

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hedged tender

An investor's tender of securities accompanied by the short sale of a portion of the securities tendered. The short sale hedges the possibility that not all the tendered securities will be accepted by the buyer and that the value of those securities not accepted will be less than the tender price.