DEFINITION of 'Mini-Tender'

Frowned upon by advocates of individual investors, a mini-tender is an offer made to a company’s shareholders — often at a discounted value — by a third-party. Because these offers represent less than 5 percent of a company’s outstanding shares, the bidder can avoid many of the U.S. Securities and Exchange Commission (SEC) regulations, unlike other tender offers that are rigorously reviewed.

To this, the SEC says, “Seller beware.” Anytime a transaction on the New York Stock Exchange can go undisclosed and not be subject to the scrutiny of the SEC needs to be evaluated very carefully by the shareholder. Bidders are not required to describe the tender offer in detail or file documents with the SEC. Plus, once the transaction is complete, there are no shareholders’ rights to withdraw from the deal.

BREAKING DOWN 'Mini-Tender'

An alert is posted on the SEC, advising that mini-tender offers “have been increasingly used to catch investors off guard” and that investors “may end up selling their securities at below-market prices.” Stockholders are advised to obtain current market quotes for their shares, to review the conditions of any mini-tender offer, to consult with their brokers or financial advisors and to exercise caution at all times

Mini-tenders typically are frowned upon by the investment community because many of the procedures and regulations associated with tenders do not apply to them. Shareholders who are approached with a mini-tender should be extremely diligent in evaluating the offer, as the terms of the mini-tender may not necessarily be beneficial to the investor.

For example, mini-tenders are not required to file any documentation with the SEC (such as the offer and information about the offering company), which makes disclosure an issue. Furthermore, most mini-tenders do not allow shareholders the right to withdraw from the mini-tender after initially agreeing to do so.

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