Investing Glossary
Key terms and concepts for value investing, special situations, and corporate actions research.
Tender Offer
A public bid to purchase shares of a company’s stock directly from shareholders, usually at a premium to the current market price. Tender offers are regulated by the SEC and must be disclosed through Schedule TO filings. They can be initiated by a third party (hostile or friendly acquisition) or by the company itself (issuer tender offer).
Odd-Lot Tender
A special provision in many tender offers that gives preferential treatment to shareholders who own fewer than 100 shares (an “odd lot”). Odd-lot holders are often guaranteed to have all their shares accepted, even if the offer is oversubscribed. This can create low-risk opportunities for small investors.
Dutch Auction Tender
A type of tender offer where the company specifies a price range and shareholders indicate the lowest price at which they’re willing to sell. The company then sets the purchase price at the lowest level that allows it to buy the desired number of shares. All tendering shareholders at or below that price receive the same per-share amount.
Spinoff
A corporate action where a company separates a division or subsidiary into a new, independent publicly traded company. Shares of the new entity are distributed to existing shareholders, typically on a pro-rata basis. Spinoffs often create value through forced selling by index funds and institutions whose mandates don’t allow holding the new entity.
Merger Arbitrage
An investment strategy that seeks to profit from the spread between a company’s current stock price and the announced acquisition price. After a merger is announced, the target’s stock typically trades below the deal price, reflecting the risk that the deal may not close. Merger arbitrageurs buy at this discount and profit when the deal completes.
13F Filing
A quarterly report required by the SEC from institutional investment managers who manage over $100 million in qualifying assets. 13F filings disclose the manager’s equity holdings and are publicly available on EDGAR. Investors study 13Fs to see what top fund managers like Buffett, Klarman, and Einhorn are buying and selling.
SEC EDGAR
The Electronic Data Gathering, Analysis, and Retrieval system operated by the U.S. Securities and Exchange Commission. EDGAR provides free public access to corporate filings including 10-Ks, 10-Qs, proxy statements, Schedule TOs, and other regulatory documents. It is the primary source for all SEC filing research.
Schedule TO
The SEC form filed by a person or entity making a tender offer for equity securities. Schedule TO-T is filed by third-party bidders, while Schedule TO-I is filed by issuers conducting self-tenders. These filings contain the offer terms, conditions, pricing, and expiration date.
Going-Private Transaction
A transaction that takes a publicly traded company private, removing it from public stock exchanges. This typically occurs through a merger, tender offer, or reverse stock split. Going-private deals are governed by SEC Rule 13e-3 and require specific disclosures about fairness to minority shareholders.
Special Situation
A broad category of investment opportunities arising from corporate events rather than ordinary business operations. Special situations include tender offers, spinoffs, mergers, bankruptcies, rights offerings, liquidations, and recapitalizations. These events often create temporary mispricings that informed investors can exploit.
Rights Offering
A way for a company to raise capital by giving existing shareholders the right to purchase additional shares at a discount to the current market price. Rights are typically transferable and trade on exchanges for a limited period. Shareholders who don’t exercise their rights face dilution.
Risk Arbitrage
Another term for merger arbitrage. The “risk” refers to the possibility that a deal may not close, distinguishing it from riskless arbitrage. Risk arbitrageurs evaluate deal certainty, regulatory risk, financing conditions, and timeline to determine whether the spread adequately compensates for the risk of deal failure.