A large amount of trading following a hostile tender offer is a good sign for the acquirer because:
A) The shares are moving from regular investors into the hands of arbitrageurs.
B) A competing offer is likely.
C) The acquirer will pay a lower premium for the shares.
D) A large amount of trading is a bad sign for the acquirer.

Question

Quizplus · Accepted Answer

When there is a large amount of trading following a hostile tender offer, it usually means that regular investors are selling their shares to arbitrageurs. This is a good sign for the acquirer because it shows that the market is pricing in the likelihood of the deal going through, which means that the acquirer is likely to pay a lower premium for the shares. Additionally, if there is a competing offer, it would typically result in even greater trading activity. Therefore, choice A is the best answer.

A Large Amount of Trading Following a Hostile Tender Offer