All Cash All Stock Offer - Explained
What is an All-Cash-All-Stock Offer?
Written by J. Mance Gordon
Updated at April 20th, 2024
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What is an All Cash, All Stock Offer?
The all-cash, all-stock offer is a method of acquisition in which the acquirer agrees to buy all the target firm's outstanding shares for a stated price in cash. It can also be defined as the purchase for cash of all outstanding shares of another company, from the company's shareholders.
Generally, all cash, all stock offers are considered as a way to finish an acquisition. Offering a premium over the current trading shares price is a great method that can be used by the acquiring company to make the deal look juicy and try to win over indecisive shareholders to agree to purchase the deal.
How does an All Cash, All Stock Offer Work?
An all cash, all stock offer also has its disadvantages, one of which is the taxable event accompanied by the shareholders shares sales. A large amount of the shareholders earnings is taken by taxes if the initial amount paid by investors to get their shares is lower than the price the shares were sold, even if their shares are sold at a premium to the acquirer.
Furthermore, a way for investors to exit a company whose future is in question or whose company has a stock with a struggling price is to sell his shares for a premium. An exchange can also be carried out between the acquiring company and the shareholders - the shares held by the acquiring company in the target company for the acquiring company's shares.