DEFINITION of 'Short Tender'

An investing practice that involves using borrowed stock to respond to an offer made during an attempted acquisition of some or all of a shareholders' shares. The purchase price is usually at a premium to the market price. This practice is restricted by the Securities and Exchange Commission under rule 14e-4 of the Securities Exchange Act.

BREAKING DOWN 'Short Tender'

Officially, an investor must have a net long position that is equal to or greater than the tender offer made, in order to respond to the offer. A net long position refers to the amount of shares an investor is long reduced by any shares the investor is short in the respective security. Although borrowing shares is allowed in short selling, any attempt to borrow shares in response to a tender offer will lead the SEC to take legal action against such participants.

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RELATED FAQS
  1. What happens to the shares of stock purchased in a tender offer?

    Learn what a tender offer is, whether it is a good idea to accept a tender offer and what happens to the shares of stock ... Read Answer >>
  2. How is a tender offer used by an individual, group or company seeking to purchase ...

    Learn how tender offers are used in takeover attempts, and understand the difference between a hostile takeover and a friendly ... Read Answer >>
  3. Why would it be in the interest of shareholders to accept a tender offer?

    Learn when it is in the best interests of shareholders to accept a tender offer. A tender offer is a bid to buy a large portion ... Read Answer >>
  4. What usually happens to the price of a stock when a tender offer for shares of the ...

    Learn what happens to the price of a stock when a tender offer is made public. Some of the most contentious takeovers have ... Read Answer >>
  5. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Learn why it may often be in the best interest of a shareholder to accept a tender offer made at a premium to the market ... Read Answer >>
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