Tender offer - offer price vs. market price

Question

I recently acquired Pacific Biosciences shares, which Illumina has offered to purchase 1.2 billion dollars of, at 8$ per share. After this announcement, the share rose at 7.56$ per share. Is the price difference between the offer and the market price due to the uncertainty of such an event?

Is the company entitled to buy shares at the price they offered? If so, what would prevent them from discreetly acquiring them at a lower price from an external investment vehicle?

Instinctively (but not rationally), I would tend to jump at the chance to sell my shares. What is the reasoning process to consider in such cases?

Answer 1

Is the price difference between the offer and the market price due to the uncertainty of such an event?

Yes. That is correct. Plus the risk it may not happen.

Is the company entitled to buy shares at the price they offered? If so, what would prevent them from discreetly acquiring them at a lower price from an external investment vehicle?

Not sure I fully understand the question. There are multiple aspects of acquisition. At times the buying company wants complete control, so buys 100% in cash. The offer from Illumina looks like cash buy out. So they have to buy it from everyone.

There are other ways, part ownership, or buying with share swap, etc.

There are also regulations to protect minority share holders, essentially if regulator determines there is change in ownership, new owner should offer minority share holders fair price to sell stock.

It is normal for stocks to reach almost offer price.

Note such deals require quite a few regulatory approvals. At times they may not happen or take a while to happen