Stock Selling During Takeovers

32 Pages Posted: 11 Jun 2016 Last revised: 4 Mar 2021

See all articles by Guillem Ordonez-Calafi

Guillem Ordonez-Calafi

University of Bristol

John E. Thanassoulis

University of Warwick - Warwick Business School; UK Competition and Markets Authority; Oxford-Man Institute, University of Oxford

Date Written: December 4, 2019


Stock sales during takeover negotiations weaken the target Board's ability to recommend against the takeover, i.e., to resist. Sophisticated shareholders therefore face a coordination problem when deciding whether to sell-out early; and their actions generate a feedback loop between trading volumes and takeover outcomes. Bidding firms, anticipating the pressurising effect of future share sales on the target Board, may reduce their bids. We study these tensions theoretically. We find that increasing the influence of shareholders during the bidding process lowers equilibrium bids; elongates the bidding process; but raises the overall probability of bid acceptance; and raises expected premia for unsophisticated shareholders.

Keywords: Takeovers, takeover resistance, shareholder coordination, market feedback, global games

JEL Classification: C72, G34, G38

Suggested Citation

Ordonez-Calafi, Guillem and Thanassoulis, John E., Stock Selling During Takeovers (December 4, 2019). Journal of Corporate Finance, Forthcoming, Available at SSRN: or

Guillem Ordonez-Calafi (Contact Author)

University of Bristol ( email )

University of Bristol,
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John E. Thanassoulis

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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UK Competition and Markets Authority ( email )

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Oxford-Man Institute, University of Oxford ( email )

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