• May 2019
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Offer

An expression of interest by one party to buy an asset from or sell it to another party. The proposal itself is non-binding. But once the offer is formally made, terms are spelled out and accepted by the other party, it is legally enforceable.

When one party makes an offer, the other party may show a willingness to take it, but with changes in conditions or terms. That is what’s known as a counteroffer. It is not an acceptance of the original, it is separate and distinct. An offer is only accepted when one party sets terms and the other party agrees without amendments.

When it comes to securities trading, there subtle differences in terms that are important to understand. When an investment bank underwrites an initial public offering, it sets the initial price per share of stock, known as the “offering price.” When one party wants to buy company stock from an existing stockholder, it is known as a “tender offer.”

 

EXAMPLE:

Investor One: “You own shares in Apple, right? I’d like to make you a tender offer.”

Investor Two: “I admit I’m flattered, but at least buy me dinner first.”