An Open offer is one in which an individual, company, entity or an existing large shareholder makes an offer to acquire shares in a company.
A couple of years ago, Unilever PLC, the famous Anglo Dutch Company along with Unilever NV said that they were making an open offer to acquire an additional 22.5 per cent shares in Hindustan Unilever, India's leading FMCG company.
Thus they managed to hike their stake in the company.
Should you subscribe to an open offer?
In the case of Hindustan Unilever the company offered a price that was way above the market price. In fact, on the day of the announcement the stock price of Hindustan Unilever was Rs 550, while the offer price was Rs 600.
Many individuals who felt that the company would do well in the future did not offer their shares to Unilever. Today, if you see the price of HUL it is closer to Rs 950. Those who sold the shares at Rs 600 would have regretted the same today.
Therefore to subscribe or not to an open offer would depend on the company's growth prospects and the present price and the offer price of course.
Generally, the offer price tends to be better then the market price, thus many a times luring investors into buying.
How Do Shareholders Know Of The Open Offer?
Generally, an announcement is made in the newspapers and through various other means on the proposed open offer.
The website of the Securities and Exchange Board of India may also provide information on the same. There is an offer document that provides all information regarding the proposed open offer.
It will contain the size of the acquisition, the price at which the shares are to be purchased, future plans and reasons for buying the shares.
Shareholders are to read the same carefully and then decide if they wish to tender their shares in the open offer.
There is an offer open period during which the shareholders must submit their offer.
What Happens If You Do Not Receive The Open offer?
In case you do not receive the open offer document you can make an application on a plain piece of paper. You can mention the following:
1) Name of the first holder.
2) Number of shares held.
3) Folio number and other details.