Dawn Raid

What does it mean?
When a firm or investor buys up a substantial amount of shares in a company (making it a target firm). This is done by a stock broker, acting on behalf of a company, first thing in the morning when the stock markets open. Because the bidding company (the predator) builds a substantial stake in its target at the prevailing stock market price, the takeover costs are likely to be significantly lower than the price of a formal takeover bid.

In Other Words...
Not terribly different from a dawn raid in war. Because this is done early in the morning the target firm usually doesn't get informed about this until it is too late, and the investor has already scooped some controlling interest. You can be sure to expect a takeover bid to take place shortly after a successful dawn raid. Only a maximum of 15% of a firm's shares can be bought this way.

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Related Terms
Acquisition | Broker | Hostile Takeover | Merger | Takeover | Target Firm

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