What are top-ups?
In business, a top-up is a stock option that enables shareholders to increase their stock ownership. A top-up option is typically granted to facilitate a merger or acquisition.
Where have you heard about top-ups?
In general terms, a top-up refers to adding more money to something, such as topping up your mobile phone credit, or topping up your pension contributions. If you have a stocks and shares ISA, you can also top that up with your annual allowance.
What you need to know about top-ups.
At one time, top-ups were a popular feature of two-step mergers, but they’re not so common anymore. They usually enable a buyer to acquire unissued shares in the target company for the same purchase price as the tender offer. The procurement of these additional shares allows the buyer to obtain 90% of the target’s stock so the merger can be completed quicker.
Top-ups are designed to get faster returns for shareholders. In the event of a hostile takeover bid, a target company can use top-ups as a delaying tactic while it builds its defence strategy.