Defining Investment Jargon: Stalking-Horse Bid

by Investment U Research Team

A stalking-horse bid is a phrase that your rarely hear, but one that might start showing up more with the amount of companies going into bankruptcy.

Last month, VeraSun Energy (OTC: VSUNQ), one of the nations largest ethanol manufacturers, declared they had received a stalking-horse bid for their physical assets as they undergo bankruptcy proceedings.  

A stalking-horse bid is an initial bid on a bankrupt company’s assets. Generally, the bid comes from an interested buyer selected by the bankrupt company in order to set the minimum price they will consider on the liquidation of their assets.

This prevents multiple low-ball offers from pouring in and forces potential buyers to compete against each other. 

On receiving the stalking-horse bid from Valero Energy (NYSE: VLO), Verasun opens the doors for other companies to submit their bids. The goal, being to get the best price possible for the creditors of VeraSun.

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