Shareholder Welfare and Substantial Share Acquisition Outside of the Williams Act

Friday, January 1st, 1988 at 12:00 am by Michael Ryngaert, Jeffry Netter & David Malmquist
Michael Ryngaert, Jeffry Netter & David Malmquist, Shareholder Welfare and Substantial Share Acquisition Outside of the Williams Act, 1988 Colum. Bus. L. Rev. 505

This paper analyzes the desirability of regulating open market stock purchases during or shortly after a tender offer. Our analysis of the issues and our examination of the limited existing evidence concerning actual sweeps suggest that such regulation would be premature. On a theoretical level, we examine the role of arbitragers in the tender offer process and discuss how shareholders benefit from the activities of these arbitragers. We also note that arbitragers will not, on average, profit at the expense of other shareholders (for example, by systematically having their shares purchased at more favorable terms than other holders), since both competition among arbitragers and corporate governance provisions discourage the unequal treatment of shareholders. Among these provisions are ‘fair price’ amendments, control share statutes, appraisal remedies, and the threat of litigation.

Author Information

Michael Ryngaert is an assistant professor of finance at the University of Florida. B.A., 1981, Michigan; M.B.A., 1985, Chicago; Ph.D., 1988. Jeffry Netter is an assistant professor of finance at the University of Georgia. B.A., 1974, Northwestern; M.A., 1976, Ohio State; Ph.D., 1980; J.D., 1985, Emory. David Malmquist is the associate chief economist at the Securities and Exchange Commission. A.B., 1967, Hunter; M.A., 1969; Ph.D., 1978, Graduate School of the City of New York.