Would someone mind explaining how tender offers work? I keep hearing that it's not a bad way to make some short term profits.
I know that a company announces that they plan to buy back shares at a premium at some point in the near future, but I don't know how it's done in terms of procedure. (Where do I go? Is there a special trading platform, or can I do it from my regular brokerage account? How long do I wait? Is it redeemed automatically? Or is there some kind of form I need to fill out?)
I also hear people refer to this as arbitrage. Arbitrage is supposed to be instant and risk-free, right? If there is a risk that the tender off won't happen and if it does, it happens in the future (tying up your capital in the meantime), then isn't it by definition NOT arbitrage?
Finally, is this strategy "worth it?" Successful investors think long term, so I fear that focusing on short term profits might be the wrong mindset. It might not be the best idea when you factor in the opportunity costs.
Please don't feel obligated to write long paragraphs here if you can't spare the time. I would be happy if you just pointed me in the right direction in terms of articles, books, etc. But if you are going to recommend other sources, please make sure they're not too technical. I'm not a CFA or anything.
Thank you for your help.
Submitted July 07, 2017 at 12:47PM by Weftad http://ift.tt/2sxZcp9
