1. Anyone who either singly or as part of a group acquires 5% of stock of a publicly traded company/firm must identify themselves with the SEC through Schedule 13D filing. After acquiring 5%, that person has 10 calendar days (not business days) to give notice to the SEC through the Schedule 13D, and during that period can continue to acquire shares.
- 13D gives notice to everyone, so boards are on notice their company is in play, and rest of investment world also has notice. Advantage of acquiring before 13D is that it can be done secretly.
2. Anyone making a tender offer must file an elaborate (and expensive) set of disclosure documents, which must reveal (among other things) source of funds used to facilitate tender offer, identity of purchasers (or tender offer), and what acquirer's plans are for the investment/purchase (for the company it's seeking to take over via tender offer).
3. Any acquirer who raises their price during the term of a tender offer must raise the price for any stock that was already tendered.
- Fairness principle for pricing
- In other words: A tender offer might start out trying to get stock as cheaply as possible (ex: 50 shares @ $25- some ppl tender shares at $25. But that's not what tender offerer wants - he wants 50%. Realizes needs to spike up price to get more interest. Raise price to $30/share, get another 20% of shares to tender shares at $30, but still want another 20% of shares so have to go higher and go up to $35/share, then get 50% of shares they're looking for, then realize they can't pay $25/share to some and $35 to others, have to give everyone $35/share- so everyone ultimately gets the $35/share. That way early tenderers don't get left out in the cold.
4. Any acquirer (tender offeror) must hold the tender offer open for a minimum of 20 business days (about 1 month).
5. Tender offerors must accept stock on a pro rata basis from all shareholders who tender.
- ex: 1st group seeking 50% of shares. Initially tender offeror can do that b/c they don't know how many they'll tender. But if all SHs tender their shares btwn day 1 and 20, offeror can only take 50% of everyone's shares that have been tendered. Has to, on a pro rata basis, take 10% that everyone tenders. Therefore, there's no benefit to rushing in and buying all shares on day 1.