A tender offer is an offer by the issuing company or an outside investor to purchase at least 5% of the company’s shares from current shareholders. The purchaser makes an offer and can purchase the shares with cash or securities. Generally the offer will be above the current market price. A shareholder has the option to sell their shares. A shareholder may only sell up to the current number of shares they own.
The purchaser may require a minimum number of shares in order to complete the purchase. If the shareholders do not sell the minimum number of shares, then the purchaser’s offer expires.
If the tender offer is oversubscribed, then the shares are sold proportionately from the shareholder’s that wish to sell.