Assented Stock

Assented stock refers to a security, typically an ordinary share, where the owner has agreed to the terms of a takeover bid. Different prices may be offered for assented and non-assented stock during takeover negotiations.
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Definition

Assented Stock refers to a security, usually an ordinary share, where the owner has agreed to the terms of a takeover bid. During a takeover bid, the acquiring company proposes to purchase shares of the target company. Shareholders who agree to the terms and tender their shares confer an “assented” status to their stock. Often, distinct prices exist for assented and non-assented stocks depending on their compliance with acquisition terms.

Examples

  1. Corporate Acquisition:

    • Company A is attempting to acquire Company B. The shareholders of Company B are offered $100 per share to tender their stock. If a shareholder agrees and tenders the stock, those shares become assented stock.

  2. Partial Agreement:

    • In a takeover where not all shareholders immediately agree, some shares become assented stock (agreed upon terms) while the rest are non-assented stock. Company A might offer $100 for assented shares and only $90 for non-assented shares.

Frequently Asked Questions

1. What is the primary benefit of assenting your stock during a takeover bid? The primary benefit is typically receiving a higher price per share compared to non-assented stock holders, as a form of premium for agreeing to sell.

2. Are there risks involved with assenting your stock? Yes, there is a risk that the takeover may not complete. Also, after the takeover, the market value could potentially rise, meaning assented shareholders might have sold at a lower price.

3. Can shareholders change their mind after initially assenting their stock? Typically, there is a specified period during which shareholders can withdraw their assent; however, this depends on the terms put forth during the takeover bid.

4. What influences the price difference between assented and non-assented stock? Price differences are influenced by factors like the overall acceptance rate, urgency of the acquiring firm, and the strategic importance of the acquisition.

5. Do all takeover bids involve assented and non-assented stock? Not all takeovers provide different quotes for assented and non-assented stock; this arrangement depends on the specifics of the takeover bid and the strategies of the acquiring company.

Takeover Bid: An offer made by an individual, group, or company to purchasers of shares aiming to gain control of a company.

Ordinary Share: A unit of equity ownership in a corporation that carries voting rights and earns dividends.

Non-Assented Stock: Shares that are not tendered during a takeover bid, whose owners have not agreed to the terms proposed by the bidder.

Online References

  1. Investopedia: Takeover Bid
  2. Investopedia: Types of Securities
  3. The Balance: How Stock Takeovers Work

Suggested Books for Further Studies

  1. Mergers and Acquisitions for Dummies by Bill Snow
  2. Valuation: Measuring and Managing the Value of Companies by McKinsey & Company Inc.
  3. The Art of M&A: A Merger Acquisition Buyout Guide by Stanley Foster Reed, Alexandra Lajoux, and H. Peter Nesvold
  4. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset by Aswath Damodaran

Accounting Basics: “Assented Stock” Fundamentals Quiz

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