In a tender offer, if shareholders are willing to sell their shares, what determines the allocation when the offer is oversubscribed?

In the context of a tender offer, when an oversubscription occurs—meaning that more shares are tendered than the offeror is willing to purchase—the allocation is determined by proportional allocation based on shares tendered. This method ensures that all shareholders who wish to sell have the opportunity to sell their shares in a fair manner, reflecting their proportionate ownership of the total shares tendered relative to the total shares being purchased.

Proportional allocation takes into account the amount of shares that each participating shareholder has tendered, allocating shares in relation to how much each tendered compared to the total that was offered. For example, if a shareholder tendered 100 shares and the total amount tendered by all shareholders is 1,000 shares, the allocation would ensure that that shareholder receives a percentage of the total shares being purchased based on their contribution. This method is designed to treat all participants equitably, preventing any scenario where only a select few shareholders benefit disproportionately from the tender offer.

Other methods, such as preference to larger shareholders, equal distribution, or first come, first served, do not provide the same level of fairness and equity in allocation during oversubscription scenarios. These alternative allocation strategies could disadvantage smaller shareholders or lead to unequal chances based solely