Assented Stock

What Is Assented Stock?

Assented stock consists of securities owned by a shareholder who has agreed to a takeover bid for a company. Assented stock, aka assented shares, may be traded in a different market than non-assented stock, which represents shares of shareholders who are holding out on the takeover.

Shareholders approach the prospect of a takeover with one primary goal: getting the best deal for the shares that they own. The acquiring company typically offers to purchase a controlling interest of stock at a premium to its current trading price. Shareholders who agree to the terms of the takeover bid are said to hold assented shares, and typically receive a higher price than shareholders who do not agree to the takeover bid. Shareholders who do not agree are said to hold non-assented stock.

Understanding Assented Stock

Acquiring companies may take a two-tier approach when making a takeover bid. A two-tier bid, also known as a two-tiered tender offer, occurs when the acquiring company is willing to pay a premium above and beyond the target's current market price in order to convince its shareholders to sell their shares.

The acquirer will offer a higher price to enough shareholders to rack up the number of voting rights required to obtain a controlling interest in the company. The shareholders who accept this highest price hold assented shares. (It's called a "two-tiered offer" because the acquirer gets control over the target in the initial tier, but then makes another, lower offer for more shares through the second tier that is completed at a future date.)

Usually, the price offered for assented stock is greater than for non-assented stock, reflecting the acquirer's desire to gain control.

Shareholders who own non-assented shares — who aren't agreeing to the acquisition — may be relying on company management employing poison pill defenses, such as a back-end plan, to dilute the voting power that assented stock will provide to the acquiring company.

Special Considerations

Often, assented stock becomes untradeable: It is deposited in a separate account, held by a third party, until the acquisition goes through.

However, sometimes assented shares may be traded on a separate market from non-assented shares, with the acquiring company setting up the market so that shareholders who have accepted the takeover share price can continue trading their shares. This separate market, referred to as an assented share trading facility, is established so that the value of the assented shares is set at the price that the acquiring company has indicated that it will pay, which may be higher than the amount non-assented shares would fetch on the open market.

If, in the interim and before the takeover happens, the assented shareholder sells their stock, the buyer committs automatically to accepting the acquirer's bid.