Offer

An offer refers to a situation of something being proposed to someone. In finance, an offer means a situation preceding a purchase when one party expresses an intent to buy or sell something to another party at a certain price. An offer in this case is backed by a legal agreement in case it is accepted by the second party, and it becomes legally binding. In other words, an act of putting something up for sale with a set price is an offer, as well as a clearly expressed resolution to buy a product.

Offers key features and types

In financial area, offers are designed to have legal force after accepting, which distinguish them from casual conversational offers made in interpersonal communication. Thus, it’s crucial for such an offer to be competently and soundly prepared in a way making it clear that after accepting, an obligation follows, and stating all the relevant information of the offer, including the price, amount, time period of the purchase, and the conditions needed. All those precautions must be done to eliminate conflicting interpretations and possible misunderstanding in the future.

As offers comes before a great variety of operations and activities in financial sphere, there are many possible forms and variations of offers, specifically designed for different cases. Those kinds of offers differ in content and provide various conditions, price ranges, rules depending on an asset type and intentions of the buyer and the seller.

Possible and widely-used offers include the following:

• subject offers;
• conditional offers;
• purchase offers;
• open offers;
• tender offers and some others.

Instances of Offers in finance

One of the best-known and common situations where an offer is used comes from the real estate sphere. Potential buyers of the property on sale propose their offers with their highest acceptable price to the seller, who, in turn, might accept one of those offers and start the process of selling at the price stated in that offer, but the seller isn’t obliged to choose one and is usually free to wait for other offers if the current ones are not satisfying. 

Another interesting example happens during a process of initial public offering (IPO), when a company offers its shares for purchase for the first time, i.e. makes it publicly available for investors. In this case, an offering price is set for the stock in question by the investment bank that underwrites it. To set the price, a specialist or a group of specialists called underwriters need to analyze many factors to determine an optimum price for the stock given, which would be satisfying for both potential buyers and the company, and at the same time reflecting the actual stock value.

Besides purchases, offers are also used in the area of employment. In this situation, an offer refers to a set of conditions an employer prepares for his or her potential employees.

In this type of offer, the following things are often included:

• salary levels;
• rules and conditions;
• healthcare issues;
• possible motivational mechanisms, and other things.