While the fundamental advantage of investing in stocks lies primarily in receiving capital gains and dividends, investors in these securities can benefit from other means such as when the issuer buys back or when another company buys them back. make an offer
Investbro discussed share buyback Previously. So let’s talk about the second condition, what is a Tender Offer and how does this activity benefit investors? Read more below:
Definition of Tender Offer
In tender offer language, it means a voluntary offer. A tender offer is an offer to buy shares or other securities of one company to an investor in another company. For example, Company A offers to buy shares of Company B from an investor.
Securities that can be purchased are not only in the form of shares but also securities that can be exchanged for shares such as convertible bond or letters Advance booking rights (HMETD)To attract investors to sell their assets, these other companies often offer higher purchase prices.
However, the total price quoted by the quoted company also depends on the number of shares owned by the investor involved. In addition, the purchase and sale of these securities transactions has a fixed time, so if you are interested in participating. Make sure you know the opening and closing dates.
A tender offer is generally part of a company’s program to acquire ownership of another company. It should be remembered that if investors Whether it is a retail investor or an institutional investor. Holding more than 50% of the company’s shares, it can be said that the investor owns the company.
If you agree to participate in this program You can exchange shares that you own for cash or exchange your shares for shares issued by the auctioning company. for the latter model It is often referred to as a barter offer. However, many people use the terms tender offer and exchange offer synonymously.
For example, you have 100 lots of Company A’s shares worth 500 Rp. per share, or a total of 5,000,000 Rp. of 500 x 100 x 100. Company B wants to buy Company A and offers you to buy Company A’s shares at a price of 600 per share.
Company B offers cash and stock payments. If in cash, you will receive IDR 6,000,000. If it is shares at the price of Share B. Assume Company B’s stock price is 1200 per share, you will receive 5,000 shares (6,000,000 : 1200 Rp).
How bids work
From the point of view of a potential investor to control The tender offer is as follows:
- Investors or companies wishing to take over other companies must submit the required documents to OJK and the Target Companies. If necessary, the Investor must submit any amendments and additional information no later than 5 days after OJK receives the initial documents.
- If the tender offer and license to the declaration are approved by OJK, the prospective new controlling investor will be required to announce the transaction to a wide audience through the media.
- The bidding period is about 30-90 days from the announcement date.
- The new controlling investor is expected to make an allocation. This allocation period must be completed within 2 days of the end of the auction period.
- Make an offer to buy by giving money or stock as a medium of exchange. Submit a report on the results of the tender offer to OJK and appoint a panel of experts to verify the fairness of the allocation.
How to participate in the tender offer
Would you like to participate in the company’s tender offer? Here are the steps for tracking this transaction for you:
- Know the date of the offer period.The results of the tender offer will only be received by the investor who completes the required documents in time.
- Fill out the prerequisite documents.Details of these prerequisite documents can be found in the disclosure documents submitted by the Company and its amendments. In some cases, details can be found on the Company’s official website. Included in these documents is a repurchase form (FPK).
- Documents are sent to the securities office. / Securities company appointed by the securities issuer
- Investors will receive a letter of acceptance of FPK.. This evidence must be kept in case the investor is not allocated shares.
- The number of shares held by the investor will automatically decrease.according to allocation
- Investors will receive funds to buy stocks. from a securities company or Custodian Bank to use
during this transaction period Investors and companies buying shares can cancel the transaction at any time. If the offering investor cancels the transaction after depositing the FPK, he must submit a written letter before the due date. After that, the stock will be automatically returned to the investor’s account.
Advantages of making a tender offer
for investors Making a tender offer offers attractive financial benefits. Because the offer price is higher than the stock price in the market. Not to mention whether the bidder is a large company or not. And he also offers services on the stock exchange.
For companies that are buying other companies The advantage of this strategy is that it does not require a large deposit in advance. Fast access to target companies And it is possible to cancel the transaction in the middle.
Disadvantages of the tender offer
Disadvantages of a Tender Offer for Companies Looking to Acquire Other Companies especially for companies that are relatively weak is the possible cost of employing a large team of specialists. and the possibility that the process will take a long time
In addition, if another company makes a tender offer for the same target company, there is a possibility that investors will ask for a higher price. The reason for this is that it is possible to end the transaction mid-way and the competition between the two companies. The probability that investors lose their assets is only 50:50.
for investors The disadvantage of this transaction is the loss of the opportunity to earn more profits in the future. Especially if the target company is a good company. Because although there is a right, but the Tender Offer is rarely rejected.
In addition to the tender offer and share buyback, There are many trading transactions of these securities that you can use to earn profits. To get information about these transactions, you can choose a stock trading app that has a company action news feature. This is because now the news of the company’s operations is not only accessible in the newspapers. But also directly access it using the best stock trading applications.