What Happens When I Don't Tender My Shares?

Merging public companies often submit to numerous reviews before closing a deal.

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As a stock investor, you may receive an offer to "tender your shares" if an investor extends an offer to purchase a company's outstanding securities from its shareholders. The investor sweetens the deal typically by offering a premium - a higher price than the existing company's stock price. Although you can refuse the tender offer, which means that you do not sell your shares, you may stand to make a bigger profit (and in a much quicker time frame) if you accept the deal. If you don't tender your shares, you'll likely receive the cash or stock you would have received had you tendered them up-front. But in the case of a merger of acquisition, you won't receive payment until the acquisition or merger is complete, which can take a while.


Although an individual or corporation may extend a tender offer to purchase another company's securities, a publicly traded company may also extend a tender offer to buy back its own outstanding securities.

Understanding a Tender Offer

A tender offer occurs when an acquiring company offers to buy another company, the target, at a specified price. The tender offer involves the purchase of the majority of a company's outstanding shares during a defined period of time. For the tender offer to be successful and shareholders to receive the price offered, investors must remit a specified percentage of outstanding shares.

Companies often grow through mergers and acquisitions. These transactions involve the exchange of cash or stock for existing shares in the target company. Reasons for acquisitions can range from expanding a market footprint to broadening product or service offerings to gaining new distribution or sales channels. Because larger public companies can have millions of outstanding shares and hundreds of thousands of investors, companies need shareholders to turn in, or tender, their shares.

Tendering Your Shares

When you tender your shares, you physically or electronically sign documents provided by your brokerage firm in which you agree to remit, or turn over, all your shares. In the rare event that you actually have stock certificates in your possession, you must mail in the stock certificates to the designated address. In a cash purchase, once you remit your shares, you receive cash at the acquisition price per share. In a stock acquisition, you receive an agreed-upon number of shares in the acquiring company.

Completing Your Transaction

If you do not tender your shares, you will not receive any payment, in cash or stock, until the acquiring company fully completes the acquisition or merger. Once an acquiring company and its target work through the major legal and regulatory hurdles, they will announce a completion time frame. Once only minor issues remain, the companies will announce the completion date, which legally finalizes the deal.

Depending on the complexity, this approval process could take several weeks to more than a year. Once the companies complete the acquisition, through your brokerage firm, you will receive cash or stock for your shares at the tender offer price.

Evaluating Other Options

If you did not tender your shares and the merger or acquisition fell through, you will simply retain the shares you owned before the tender offer was made. Although institutional investors make up the bulk of investors in a publicly held corporation, some takeovers may be hostile, meaning the board did not approve the acquisition.

With hostile transactions, some companies have special provisions that require as much as 80 percent of shares to be tendered for the deal to close. In this scenario, if you are in favor of the deal, you probably want to tender your shares. Failing to do so increases the risk of the deal not closing, although, admittedly, unless you hold a considerable number of shares, the increased risk will be very small.