All-Holders Rule

  

Categories: Regulations, Banking

No, all-holders do not rule the planet (though we hear all hosers rule Canada). Rather, the all holders rule refers to a Securities and Exchange Commission (SEC) regulation that says publicly traded companies must offer new issues of stock or other securities to all current shareholders "of the same class." Don't rush to the barricades we'll explain.

So if the company wants to issue more Class B shares, it has to allow all current Class B shareholders to participate. And if the company wants to buy back any Class B shares, it has to allow current Class B shareholders to sell their shares back. If you only have Class A shares, you are out of luck. The term also refers to another SEC rule that says a tender offer to buy another company must include all the target company's shareholders.

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Finance: What is the All Holders Rule?4 Views

00:00

Finance a la shmoop, what is the all holders rule? No this is not about

00:09

post-coital rules of engagement.. The holder here is about those holding stock [Two peoples heads pop out from under a duvet and a stop sign appears]

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in a company in this case likely holding stock in a company where a contentious

00:19

takeover bid has come in from the cold cruel world outside with a bidder [Pacman]

00:23

wanting to pay $17 and 23 cents a share for about a $2 premium over where the

00:28

stock was trading yesterday while a rival set of shareholders want more like

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20 bucks a share to sell the iPod hearing aid company to just you know [Billboard for the iPod hearing aid company]

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sell and go away. Well the all holders rule came along as part of the 1934 Act

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if the SEC was establishing granular rules so that the legally [Two people in suits walking down a corridor]

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unsophisticated weren't turned into lunch when the hungry Wall Street wolves [A wolf appears and drags one of them away]

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got a hankering for deals. So what's the rule with all holders, well it's simply

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that all holders of the same exact class of security. i.e. basic common stock have

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to be offered the same deal that is one offer can't be given to the people who [Good offer document is given to Company A]

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wanted to sell at just 17 dollars and 23 cents and then some other punitive deal [Bad deal given to Company B]

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like is offered to the others like you know.. if you don't take this by 4:00 p.m.

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next Thursday we'll teepee your homes and then offer at most 16 bucks a share [Angry looking guy in a suit]

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going down a dime a week until you say uncle, or aunt yeah well that's the all

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holders rule. All holders get the same deal.

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