What is Hedged Tender?

A hedged tender is an investment strategy where an investor sells short a portion of shares they own in anticipation that not all shares tendered will be accepted. This strategy is used to protect against the risk of loss, ♓in case the tender offe༺r does not go through. The offer locks in the shareholder's profit no matter the outcome of the tender offer.

How a Hedged Tender Works

A hedged tender is a way to counteract the risk that the offering company refuses some or all of an investor's shares that are submitted as part of a 澳洲幸运5官方开奖结果体彩网:tender offer. A tender offer is a proposal from one investor or company to purchase a🔴 🧸set number of shares of another company's stock at a price that is higher than the current market price.

Hedged Tender as Insurance

A hedged tender strategy, or any type of hedging, is a form of insurance. Hedging in a business context or in a portfolio is about decreasing or transferring risk. Consider that a corporation may want to hedge against 澳洲幸运5官方开奖结果体彩网:currency risk🧜, so it decides to build a factory in another country that it exports its pཧroduct to. 

Investors hedge because they want to protect their assets against a negative market event that causes their assets to 澳洲幸运5官方开奖结果体彩网:depreciate. Hedging may imply a cautious approach, but many of the most aggressive investors use hedging strategies to increase their opportunities for positive returns. By mitigating risk in one part of a portfolio, an investor can often take on more risk elsewhere, increasing their 澳洲幸运5官方开奖结果体彩网:absolute returns while putting less capital at risk in each individual i🐬nvestment.

Another way to look at it is hedging against investment risk means strategically using 澳洲幸运5官方开奖结果体彩网:market instruments to offset the risk of any adverse 澳洲幸运5官方开奖结果体彩网:price movements. I๊n other words, investors hedge one investment by making another.

Example of a Hedged Tender

An example would be if an investor has 5,000 shares of Company ABC. An 澳洲幸运5官方开奖结果体彩网:acquiring company then submits a tender offer of $100 per share for 50% of the 澳洲幸运5官方开奖结果体彩网:target company when the shares are worth $80. The investor then anticipates that in a tender of all 5,000 shares the bidder would accept only 2,500 pro-rata. So, the investor determines that the best strategy would be to sell 2,500 shares short after the announcement and when the price of the stock approaches $100. Company ABC then buys𝕴 only 2,500 of the original shares at $100. In the end, the investor has sold all shares at $100 even as the price of th💎e stock drops following news of the potential transaction.