PayPal woke up to a nightmare when it received an unsolicited offer by the infamous TRC Capital Corporation (TRC) to buy up to 3 million shares of its common stock at a reduced price.
The offer, which valued PayPal’s common stock at a 4.6 percent reduced rate, was extended to “catch investors off guard if the investors do not compare the offer price to the current market price,” PayPal said in a statement.
The company clarified that it does not endorse TRC Capital’s offer and recommended that its shareholders do not tender their shares. “PayPal is not associated with TRC Capital, its mini-tender offer or the mini-tender offer documentation,” the company said.
PayPal is not first company to wake up to such an offer. Previously, TRC has extended such unsolicited offerings to big companies including Yahoo and Gilead.
In late August, Toronto-based TRC, which is headed by CEO Lorne Albaum, extended another unsolicited offer to AT&T to buy 3 million of its shares at $31.30, or 4.3 percent below AT&T’s closing price on Aug. 26, 2015, according to an AT&T statement.
Just like PayPal, AT&T released a statement recommending shareholders not to fall for the offer.
“TRC has a history of mini-tender offers," AT&T wrote. "Like its other offers, this one puts individual investors at risk because they may not realize they’re selling their shares at a discount. AT&T urges investors to get current stock quotes for their shares of AT&T, consult their financial advisors and exercise caution with respect to TRC’s offer.”
Mini-tenders always amount for less than 5 percent of the company's equity, which lets it avoid regulations put up by Section 14(d) of the U.S. Securities Exchange Act, or SEC Regulation 14D and are only subjected to anti-fraud regulations imposed under 14E. This whole scheme, lets it avoid disclosure requirements, which are mandatory for larger tenders, and get away with buying shares at a reduced rate.
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