I'm Bernard Whimp and this website details the off-market offers to buy company shares my limited partnerships were involved in almost a decade ago.
You may be asking, “What's an off-market offer?” I will explain.
An off-market offer is a term to describe an offer to buy shares in a public company (usually listed on a stock exchange) which is made directly in writing to the shareholders, rather than buying the shares on the stock exchange.
In 2010/11, making an off-market offer was in compliance with all applicable New Zealand laws. It enabled you to set your own terms of purchase with regards to the price per share you were willing to pay and the method and timing of payment. If you were to buy the same shares via the stock exchange, you would be stuck with the price set by the different buyers and sellers on the day and the stock exchanges three-day settlement terms.
“You can think of an off-market offer at a price that is less than the market price as close to a 'sure thing' asymmetric trading opportunity.”
If you made an off-market offer (or as the media call a low ball offer), you were free to offer any price for the shares that you chose. You didn't have to be bound by whatever price those shares were changing hands at on a stock exchange. If you thought the shareholders might sell for less, then you were free to make an offer for less. It was up to the individual shareholders to decide whether they would accept an offer or reject an offer. It was entirely in their hands.
The shares of a company are tiny fractions of the entire business (own all of the shares and you own the entire company). Shares enable a diverse range of owners to participate in the success (or sometimes failure!) of a particular business. If you are a share investor, when you buy shares, you're buying in 'stock' the same way any other business would. You're trying to buy shares at the lowest possible price, in commercial terms, you're trying to buy low and sell high.
Why would you buy shares on the market, at the exchange price, if you thought you could offer direct to shareholders, and they'd sell to you for less?
You can think of an off-market offer at a price less than the market price, as close to a 'sure thing' asymmetric trading opportunity, where the purchaser is thoughtful and informed and the vendor is passive and disinterested. There is nothing wrong with that, to most people that's business.
The fact that the vendor might be disengaged or not care what price they receive, or have their own reasons for accepting the offer, aren’t reasons not to offer it in the first place. Most people would be delighted, if, for instance, they offered to buy a house, the vendor just accepted their offer and didn't haggle over the price.
“Of course, offering (entirely legally) to buy company shares for whatever price you choose (where your offer price is less than the share market traded price) is bound to get quite a few people excited in one way or another.”
Life hasn't reached the stage where you're obligated to go around educating vendors as to what you perceive their property to be worth. You're not obliged to say, “no, no, don't accept the price I've offered you, it's worth more,” although those days can't be far off, given the ‘let's protect everyone from themselves, we know best’ attitude of today's governments and regulators.
Of course, offering (entirely legally) to buy company shares for whatever price you choose (where your offer price is less than the share market traded price) is bound to get quite a few people excited in one way or another. The mainstream media worked themselves into a frenzy over the offers, their first angle being — what's the point, why would anyone accept? And then absolute consternation as they became aware that considerable numbers of shareholders had accepted, and sizable profits were being made. Egged on by their contacts in the ‘big end of town’ (an Australian expression to describe the banking financial/corporate sector) and their lobbyist mates at the country's most prominent commercial law firm, the media's breathless reporting of these events knew no limits.
The media, as is their inclination, took it upon themselves to invent reasons why the offers were successful. This gave rise to the theory, ‘little old ladies and small shareholders’ and that's why this media-generated theme was fiction. No doubt there were a few little old ladies and small shareholders who accepted but there were also many well-educated professionals. In fact, there was a complete cross-section of New Zealand society. By far the greatest reason for acceptance was that many of the shareholders had no share broking account they could sell their shares through and couldn't be bothered with the tribulations of setting one up.
These people weren't natural shareholders who had bought their shares on the market through a broking account, they were shareholders who had been given their shares in the demutualization of electricity companies (that's where an electricity company had at some earlier point distributed shares to anyone who had a power account history with them, at no cost). To many in this group ,my partnerships' offers simply presented a way for them to convert their free shares into cash at no bother to themselves.
The purpose of this website is to set the record straight, tell the story and offer an inside view of my experiences in the off-market offers business. I've long since moved on from off-market offers, the law has changed since then in a way that makes these offers unviable today. For a few brief months in late 2010 — early 2011, it was quite a (profitable) Read the inside story here