Self-tender

A 'self-tender' refers to a type of offer made by a company to repurchase its own outstanding shares of stock from existing shareholders. This process is usually conducted at a specific price and within a defined time frame. It can be used to reduce the number of shares in circulation, potentially increasing the earnings per share (EPS) and the market value of the remaining shares. Self-tenders often signal to the market that management believes the stock is undervalued or that the company has excess cash available for investment. The offer is usually made at a premium above the current market price. Successful self-tenders involve a shareholder decision to accept the company's offer or hold onto their shares.

Self-tender meaning with examples

• Acme Corp announced a self-tender to buy back 10 million shares at $55 each, representing a 15% premium. Investors had the option to sell shares within a month, potentially increasing their return. Analyst forecasts showed an immediate market reaction, but the company's shares remained a solid hold or buy.
• After a period of sustained profitability, Beta Industries initiated a self-tender program. The program was announced to utilize its surplus cash flow, thereby reducing its outstanding shares. This also showed market confidence, as executives felt that the price per share was low relative to other industries.
• During a financial restructuring, Gamma Technologies launched a self-tender offer as part of its capital allocation strategy. The intention was to optimize shareholder value. Investors weighed the potential gain from selling shares against the expected benefits of remaining a shareholder.
• Delta Manufacturing made a self-tender bid in response to a hostile takeover attempt. By repurchasing its shares, Delta hoped to increase the ownership stake of existing shareholders. The bid was accepted, providing greater control of the company and warding off unwanted acquisition.
• As part of a regular capital return strategy, Epsilon Solutions issued a self-tender. The bid was attractive to investors. It offered them a short-term gain. In exchange, the overall value and ownership per share grew for existing investors.