Once a tender offer is announced, the uncertainty about whether the takeover will succeed reduces the volatility of the share price. This uncertainty creates an opportunity for investors to speculate on the outcome of the deal without bearing the risk of volatility.

Question

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The announcement of a tender offer usually increases the volatility of the share price as investors start speculating on the outcome of the deal, which can be positive or negative for the company. Thus, investors bear the risk of volatility, and there is no opportunity to speculate without risk.

Once a Tender Offer Is Announced, the Uncertainty About Whether