Why do companies who want to acquire a target company, go for tender offer & want to pay a premium to the existing shareholder, when they can just buy the required quantity without premium FROM the open market?

Question

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In: Economics

Answer 1

It would be more expensive to buy the stock on the open market. As supply drops the price will increase. There is also the issue that the sec could see it as a pump and dump or some other illegal trading. And you run the risk of the company dumping large amounts of stock to deflate the price and screw you over.