Book Opener

Taking StockOnline investing hasallowed averageAmericans to begininvesting in aconvenient way. Infact, according toBusinessWeekmagazine, more thanhalf of Americanhouseholds now ownstock, and about onefifthof the householdsmade their firstinvestment during thepast four years. Inwhat type ofcompanies wouldyou like to invest?Get involvedLook at the financialsection of your majornewspaper, and reviewthe type of stocksyou’d like to buy. Keeptrack of the rate ofincrease or decrease invalue. Look online tofind similar methods ofmonitoring stocks andstock options.Stock AcquisitionAnother type of expansion is a stock acquisition , which occurswhen an individual or a corporation purchases enough shares of stockin a corporation to control it. A stock acquisition often begins with atender offer to shareholders of the corporation. This is an offer to buya number of shares at a specified price. Tender offers are often referredto as takeover bids and are usually communicated to the prospectiveselling shareholders through a newspaper advertisement. The corporationmaking the tender offer is referred to as the suitor , and the corporationto be taken over is called the target . The suitor does not haveto buy all the stock of the target, but just enough to control the electionof directors. The suitor can also sidestep the directors and appeal directlyto the shareholders.Example 1. Wentworth, a multimillionaire, has decided that hewould like to purchase Radlech Electronics, Inc. He approachesthe board of directors with his plan and finds that the directorsare not interested. The next day, in The Wall Street Financial, heplaces an advertisement, offering to purchase shares of Radlechat $49 per share. The current market price of a share of Radlechis $35. Any and all shareholders who deal with Wentworth standto make a big profit. Wentworth will not have to buy all the sharesof Radlech. He needs to purchase only enough to allow him tocontrol the election of directors. Wentworth has sidestepped thedirectors and appealed directly to the shareholders.Because the suitor often wishes to restructure or even dismantle thetarget corporation, its directors and officers often object to a tenderoffer. They may fear the loss of their positions, or they may see thetakeover bid as a threat to the very existence of the corporation. Underthese conditions one of the first steps the managers often take is tolaunch a public relations campaign to discredit the suitor. In such a campaign,they may refer to the tender offer as a “hostile takeover bid” andto the suitor as a “corporate raider.” They may also use other measuresto combat a hostile takeover bid. These include techniques such as invitinga friendly suitor to purchase a valuable asset of the corporation tomake it a less attractive target, offering to buy back the shares the hostilebidder has already purchased, but at a higher price, or inviting anindividual or another corporation to outbid the hostile bidder.656 Unit 6: Starting a BusinessGovernment Regulation ofCorporate ExpansionA flurry of takeovers took place in the 1960s and 1980s. Many ofthese conglomerate mergers, which were valued in billions of dollars,