When a firm initiates the repurchase of stock through a tender offer, it is giving the shareholders ____.
A) treasury stock notification
B) a put option
C) a call option
D) a futures option

Question

Quizplus · Accepted Answer

When a firm initiates a repurchase of stock through a tender offer, it is essentially giving the shareholders a put option. This means that shareholders have the option to sell their shares back to the company at a fixed price, typically at a premium to the current market price. This gives shareholders the opportunity to sell their shares at a profit or to exit their investment if they do not believe in the future prospects of the company.

When a Firm Initiates the Repurchase of Stock Through a Tender