Unexpected offers to buy your shares

Unwelcome proposals

Have you received an unexpected letter offering to buy some of your shares? These offers often try to buy your shares for much less than the current market price. You should be aware of some pitfalls if you get such an offer.

Find out who is making the offer and why

Some offers use an official-looking letterhead, or names that sound like the company you have shares in or a stock exchange. They may also be sent at the same time as your company's real letters.

If you're not sure, phone your company's investor relations department to double check. You can also check ASIC Connect and search within 'organisation and business names' for the company's details. 

Naturally, the company or person making the offer wants to make money. Maybe there is public information about something that is about to happen to your shares that you may not know about.

Check company announcements on the ASX or talk to a stock broker in case you missed important news that was released to the market.

Find out how much the shares are really worth

Get an up-to-date market price for your shares and compare it with the price being offered. You can check with the company, the ASX or a stockbroker.

Use the ASX find a broker tool to help you find a broker that suits your needs.

Watch out for low ball offers

Watch out for two types of 'low-ball' offers. The first offers much less than the share's market value e.g. your shares are worth $10 but the buyer offers only $5.

The second offers to pay you by instalments spread over many years. Even if the total offer price is higher than the present market value, you have to wait years for all your payments e.g. your shares are worth $10 and the buyer offers to pay $1 per year for 11 years.

Check the contents of the offer

The law restricts the manner in which an offer can be made. For example, the offer document should be dated and identify who is making the offer and give you at least one month in which to accept.

It must also state:

  • The price offered
  • If you will be paid in instalments
  • How and when those instalments will be paid

If you hold shares that are not sold on the ASX or any other exchange, the person or company making the offer needs to state in the offer document a fair estimate of the value at the date the offer was made. They also need to provide an explanation of how they arrived at this estimate.

If you hold shares that are sold on the ASX or any other exchange then the offer document needs to tell you the market price for those shares the day the offer is made.

Report the offer

Although it is not illegal to make an unsolicited offer to buy your shares, it is against the law to mislead shareholders into accepting an offer or make an offer in a manner which breaches the law. Check the contents of the offer carefully.

To report an unexpected offer which you believe is against the law, visit ASIC: do you have a question? or call 1300 300 630.

Case study: George receives a mysterious letter

Businessman reading a letter offering him to buy sharesGeorge, 38, received a letter about a company he had invested in. The letter asked George if he was interested in selling his shares. The price offered was lower than the market price which was also quoted in the letter. This made George think twice. When he called the company's investor relations department, he found out that they had issued a warning for shareholders not to respond to the offer. George was glad he checked first before selling his shares.

If you receive a letter offering to buy your shares, and you're wondering if it's legitimate, check with the company or speak to your stock broker. It's better to be safe than sorry.

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Last updated: 24 Oct 2018