If an individual acquires more than 10% in a takeover, what price requirement applies?

In the context of takeovers, when an individual acquires more than 10% of a company's shares, there are regulatory requirements in place to ensure that the interests of all shareholders are considered. One such regulation typically mandates that if a cash offer is made, it must be at a price that reflects a fair valuation.

Choosing a high price in a cash offer as a requirement ensures that the acquisition does not unfairly disadvantage existing shareholders. It aims to provide them with a proper exit opportunity, reflecting the true value of their investment. This reflects principles of fairness and transparency in the takeover process, preventing potential exploitation during the acquisition.

Other price mechanisms, like using the average price over the last three months or a price fixed by the market, do not guarantee that shareholders receive a premium for their shares, nor do they fully account for any changes in the company's value leading up to the acquisition. Lastly, having no price requirement would eliminate safeguards for shareholders, which is contrary to regulatory objectives focused on protecting investors during takeover scenarios.