Minority Discount in Publicly Traded Firms

Sammanfattning: This paper examines the minority discount due to lack of control by looking at tender offer premiums on Swedish publicly traded firms from 2007 to 2018. We analyze how ownership structure, the acquired stake and distribution of shares affect the minority discount. Variables focusing on control of shares are tested individually but also included in models addressing additional impacts. Our findings suggest that a bidder’s ownership of the target firm prior to the announcement lowers the bidder’s valuation of the remaining shares. However, the relation between premium and ownership seem to depend on a threshold of having a toehold which justifies the argument of toeholds attaining control and influence of the target firm. Correspondingly, the premium per share increases with the partial interest acquired, suggesting a non pro-rata valuation. We find no evidence of additional premium for minority shareholders in squeeze out events. However, equally powerful blockholders in target firms tend to increase bid premiums, arguably due to increased competition which aligns bid premium valuation to the valuation of control between dual class shares.