What is an 'All Cash, All Stock Offer'

An all cash, all stock offer is a proposal by one company to purchase all of another company's outstanding shares from its shareholders for cash. An all cash, all stock offer is one method by which an acquisition can be completed. In this type of offer, one way for the acquiring company to sweeten the deal and try to get uncertain shareholders to agree to a sale is to offer a premium over the price for which the shares are presently trading.

BREAKING DOWN 'All Cash, All Stock Offer'

The downside of an all cash, all stock offer for shareholders is that their sale of shares is a taxable event. Even if they sell their shares to the acquirer at a premium, taxes may take a significant chunk of their earnings if the sale price is higher than the price investors paid when they initially purchased their shares. However, all shares of stock that are made at a price higher than the stock's cost basis constitutes a taxable event, so this particular sale is not that different from a tax standpoint from a normal sale on the secondary market.

In addition, if the future of the company is in question or if the stock price has been struggling, the opportunity to sell shares for a premium might be a good opportunity to get out of the investment. Another possible acquisition method would be for the acquiring company to offer shareholders an exchange of all the shares they hold in the target company for shares in the acquiring company. These stock-for-stock transactions are not taxable. The acquiring firm could also offer a combination of cash and shares.

RELATED TERMS
  1. Risk Arbitrage

    Risk arbitrage is a strategy to profit from the narrowing of ...
  2. Acquisition

    An acquisition is a corporate action in which one company buys ...
  3. Stock-For-Stock

    In the context of mergers and acquisitions, the exchange of an ...
  4. Swap Ratio

    Swap ratio is the ratio at which an acquiring company will offer ...
  5. Open Offer

    An open offer is a secondary market offering, similar to a rights ...
  6. Rights Offering (Issue)

    A rights offering is a set of rights given to shareholders to ...
Related Articles
  1. Investing

    Know your shareholder rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company. Read on to learn what rights you have as a shareholder.
  2. Investing

    Cheap Stocks or Value Traps?

    The value of stocks that trade at less than cash per share can be deceiving.
  3. Investing

    How mergers and acquisitions can affect a company

    M&A can have a profound effect on a company’s growth prospects and outlook, but with a significant degree of risk.
  4. Investing

    When Good News Is Actually Bad News For Investors

    Learn how investors can be on the lookout for companies that spin bad news for shareholders into good news. Watch out for these types of announcements.
  5. Retirement

    Not All Retirement Accounts Should Be Tax-Deferred

    It may be better to leave your assets exposed to the tax man when you're saving to retire.
  6. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  7. Investing

    These S&P 500 Companies Hold the Most Cash

    Large cash positions allow for many different options and here's why they are beneficial to shareholders.
  8. Investing

    6 Bad Stock Buyback Scenarios

    Buying back shares can be a sensible way for companies to use extra cash. But in many cases, it's just a ploy to boost earnings.
  9. Investing

    Evaluating A Statement Of Cash Flows

    The metrics for the Statement of Cash Flows is best viewed over time.
RELATED FAQS
  1. What is a stock-for-stock merger and how does this corporate action affect existing ...

    First, let's be clear about what we mean by a stock-for-stock merger. When a merger or acquisition is conducted, there are ... Read Answer >>
  2. Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens ... Read Answer >>
  3. What are some examples of different taxable events?

    Learn what a taxable event is and how it affects investors and taxpayers with examples of taxable events that can result ... Read Answer >>
Trading Center