Assented Stock

Assented Stock Takeover Bid Ordinary Shares Securities Stock Prices Corporate Finance Acquisitions
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

### What does assented stock refer to? - [x] Stocks whose owners have agreed to the terms of a takeover bid. - [ ] Stocks that are trading below market value. - [ ] Stocks that are newly issued by a company. - [ ] Stocks that have been repurchased by the issuing company. > **Explanation:** Assented stock pertains to shares whose owners have agreed to the terms proposed during a takeover bid. ### During a takeover, what is a possible difference between assented and non-assented stock? - [ ] Voting rights - [ ] Market value restrictions - [x] Difference in offered price - [ ] Dividend payments > **Explanation:** During a takeover, different prices may be quoted for assented and non-assented stocks depending on a shareholder's agreement to the terms. ### Why might a shareholder choose to assent their stock during a takeover? - [ ] To avoid paying taxes. - [x] To receive a higher price per share offered by the acquirer. - [ ] To gain more voting power. - [ ] To participate in the company's management. > **Explanation:** A shareholder may choose to assent their stock to receive a higher price per share as a premium for agreeing to the takeover bid. ### What is a risk associated with assented stock? - [ ] The stock cannot be sold afterward. - [ ] The stock can be taxed at a higher rate. - [x] The takeover may not complete, or value may increase post-takeover. - [ ] The stock loses voting rights immediately. > **Explanation:** One of the risks is that the takeover may fall through, or the stock’s value may increase post-takeover which assented shareholders may not benefit from. ### Can a shareholder change their mind after initially assenting their stock? - [x] Yes, typically within a given period specified by the takeover bid. - [ ] No, once agreed, it is fixed. - [ ] Only if the market value of the stock changes significantly. - [ ] Only if approved by a majority shareholder vote. > **Explanation:** Shareholders often have a specified period to withdraw their assent as outlined in the takeover terms. ### What is an ordinary share? - [x] A unit of equity ownership in a corporation that carries voting rights and earns dividends. - [ ] A debt instrument issued by a corporation. - [ ] A share without voting rights. - [ ] A share distributed for free to employees. > **Explanation:** Ordinary shares are units of equity ownership that provide voting rights and the potential to earn dividends. ### Which organization typically oversees the regulatory compliance of takeover bids? - [ ] Local municipalities - [ ] The Internal Revenue Service (IRS) - [x] Securities and Exchange Commission (SEC) - [ ] Federal Trade Commission (FTC) > **Explanation:** The Securities and Exchange Commission (SEC) typically oversees the regulatory compliance of takeover bids. ### Why might different prices be offered for assented and non-assented stock during a takeover? - [ ] To trick shareholders - [ ] Due to inflation - [x] To incentivize shareholders to agree to the takeover terms. - [ ] To meet legal requirements > **Explanation:** Different prices are used to motivate more shareholders to assent to the takeover terms. ### What typically distinguishes a takeover bid from regular stock trading? - [ ] It involves only private investors. - [x] It is an offer to purchase shares aiming to gain control over the company. - [ ] It bypasses stock exchanges. - [ ] It requires insider trading information. > **Explanation:** A takeover bid is an offer made to purchase enough shares to gain control of the target company, which is different from regular day-to-day stock trading. ### Why is it important to understand the concept of assented stock for investors? - [ ] It determines the amount of taxes an investor will pay. - [ ] It offers insights into dividend policies. - [x] It offers crucial knowledge about potential premiums and risks during corporate takeovers. - [ ] It is crucial for understanding market trends. > **Explanation:** Investors need to understand assented stock to evaluate potential premiums and the associated risks if a company they own shares in is the target of a corporate takeover.

Thank you for exploring the world of assented stock and making strides in understanding critical financial terms. Keep enhancing your knowledge to make informed investment decisions!

Tuesday, August 6, 2024
Assess
Assembly Plant
Agreed Bid January 1, 1
Corporate Reorganization January 1, 1
Market Timing January 1, 1
New Money January 1, 1
Nonvoting Stock January 1, 1
Participating Preference Share January 1, 1
Pool January 1, 1
Stock Transfer January 1, 1
Subscription Right or Warrant January 1, 1
Target Company January 1, 1

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