What Is an Offer?

An offer is a conditional proposal made by a buyer or seller to buy or sell an asset, which becomes legally binding if accepted. An offer is also defined as the act of offering something for sale, or the submission of a bid to buy something.

Key Takeaways

  • An offer is a conditional proposal made by a buyer or seller to buy or sell an asset, which becomes legally binding if accepted.
  • There are many different types of offers, each of which has a distinct combination of features ranging from pricing requirements, rules and regulations, type of asset, and the buyer's and seller's motives.
  • When it comes to equity and debt offerings, the offering price is the price at which publicly issued securities are offered for purchase by the investment bank underwriting the issue.
  • Meanwhile, in equity and debt offerings, the offering price is the price at which publicly issued securities are offered for purchase by the investment bank underwriting the issue.

How Offers Work

An offer is a clear proposal to sell or buy a specific product or service under specific conditions. Offers are made in a manner that a reasonable person would understand its acceptance and will result in a binding contract. There are many different types of offers, each of which has a distinct combination of features ranging from pricing requirements, rules and regulations, type of asset, and the buyer's and seller's motives.

Examples of Offers

For example, when it comes to real estate purchases and negotiations, prospective home buyers will write an offer to the seller, and often list the highest price they are willing to pay. Once this official offer is submitted on a piece of real estate, it is considered binding if the seller accepts the offer.

When it comes to equity and debt offerings, the offering price is the price at which publicly issued securities are offered for purchase by the investment bank underwriting the issue. When startups decide to IPO or make their initial public offering, this offer price is estimated to be at the sweet spot where there is both demand from buyers who are interested and willing to purchase stock investments in the company, as well as considerations for the supply of stock available.

Similarly, a tender offer is an offer to buy a company’s stock or debt from existing stockholders and bondholders at a specified price and during a set period of time. The term "offer" is also used to refer to the package an employer or company will make to a potential employee, comprising of the full salary, healthcare and benefits package, and any other incentives such as a sign-on bonus or restricted stock units (RSUs).

Other Types of Offers

The term "offer" is a general one used to describe any kind of official bid or listing price in financial transactions, as discussed in detail above. Other kinds of offers include tender offers, conditional offers, open offers, subject offers, and entitlement offers.