Short Tender

Throw a comma in there, and you've got "Short, Tender"...the title of the tear-jerking autobiography of the world's smallest man.

But in finance, the term refers to a situation that comes up when one company tries to buy another.

When someone looks to take over a public company, they run what's called a tender offer. They announce a price. Then anyone who wants to sell their stock at that price just has to let the buyer know. Basically, the buyer says, "We're buying all the stock anyone wants to sell at this particular price."

A short tender happens when someone borrows stock to sell it in the tender offer.

Think about how a short sale works. In that situation, you borrow stock as part of a maneuver to make money when a share price declines. You borrow the stock from someone else, sell it in the open market, and hope the share price declines. If it does, you can buy the stock back, return it to the lender, and pocket the profit.

The short tender has the same general dynamics. You borrow stock, and then you sell it. However, in this case, you aren't selling it in the open market...you're tendering it as part of the takeover offer.

There are rules against short tenders. You can borrow stock for a short sale, but not as part of a tender offer. Regulators see it as a little too much inside baseball...a practice ripe for potential corruption. So they've outlawed it.