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Entry from February 17, 2011
Dawn Raid

On February 12, 1980, Harry Oppenheimer (of South Africa’s De Beers diamond mining and trading company) instructed London broker Rowe & Pitman to buy many shares in Consolidated Gold Fields, when the stock exchange opened. The takeover strategy quickly became known as a “dawn raid.”

Several laws have made the takeover term “dawn raid” largely historical, but it is still used in both the United Kingdom and the United States.


Investopedia
What Does Dawn Raid Mean?
When a firm or investor buys a substantial number of shares in a company first thing in the morning when the stock markets open. Because the bidding company builds a substantial stake in its target at the prevailing stock market price, the takeover costs are likely to be significantly lower than they would be had the acquiring company first made a formal takeover bid.

The Free Dictionary
dawn raid
n
(Economics, Accounting & Finance / Stock Exchange) Stock Exchange an unexpected attempt to acquire a substantial proportion of a company’s shares at the start of a day’s trading as a preliminary to a takeover bid

The Free Dictionary
Dawn raid
A term of British origin used to describe the purchase of all available shares of a target company at the market’s open by a raider. A dawn raid is a surprise technique that allows the raider to gain a substantial share of the target company before the target company knows what is happening.

Dawn Raid
In a hostile takeover, the act of an acquiring firm or, more rarely, an individual investor buying a substantial amount of a target firm’s stock at the beginning of the trading day. One perpetrates a dawn raid to take the target firm by surprise; by not making a formal offer to buy the company before the dawn raid, the acquiring firm does not give the target firm the chance to enact an antitakeover measure that would increase the cost of the takeover. Regulations allow an acquiring firm to buy only 15% of the target firm in a dawn raid; many acquiring firms thus make formal offers after they have a significant stake in the target firm.

(Oxford English Dictionary)
dawn raid n. Stock Exchange slang a swift operation effected early in trading whereby a stockbroker obtains for his client a markedly increased shareholding in a company (freq. preparatory to a take-over) by clandestine buying from other substantial shareholders.
1980 Times 28 May 17/6 ‘*Dawn raids’, in which a stock-market raider suddenly buys a substantial stake in a company and possibly denies non-professional shareholders the opportunity to sell at a price above that in the market, were causing a ‘great deal of anxiety’.
1980 Times 22 July 17 De Beers went into the market on the morning of February 12 and bought another 11·6 per cent in a ‘dawn raid’.

Google News Archive
11 July 1980, Glasgow (Scotland) Herald, “City Comment” by Chris Stone, “Stock market proposes to tighten up on dawn raids,” pg. 11, col. 2:
The stock market has drawn back from recommending any full-blooded abolition of the much-criticised so-called “dawn raids” which have enabled companies to pick up sudden substantial shareholdings in other organisations, though it does propose tightening the rules.

This clearly emerges from the interim report (which precedes a Department of Trade Inquiry) of the special Stock Exchange committee set up to investigate the build up by South African diamond magnate Mr Harry Oppenheimer of a 25% shareholding in Consolidated Gold Fields through his De Beers and Anglo American companies.

The investigation was in fact triggered by stockbrockers Rowe and Pitman’s “dawn raid” in February on behalf of Oppenheimer which took his stake up to around 25% in virtually a matter of minutes.

8 October 1980, New York (NY) Times, “British Stock Curbs Aim at ‘Dawn Raids’” by William Borders, pg. D7:
LONDON, Oct. 7—In a move intended to help small investors, the Council for the Securities Industry, the industry’s self-regulatory group, says it is planning to impose new regulations on the purchases of large blocks of stock.

The new rules are aimed at controlling what British stockbrokers call “dawn raids,” in which a company buys a large block of another company’s stock in a hurry, at a premium price. The name comes from the fact that the bids are usually made just as the stock exchange opens.

The stock purchases are often completed within a few minutes, with brokers rounding up the desired shares by telephoning a few institutional investors. The practice is regarded as unfair because small investors never get a chance to sell at the premium price.

New York (NY) Times
HARRY OPPENHEIMER’S EMPIRE: GOING FOR THE GOLD
By Peter Schmeisser; Peter Schmeisser is a writer based in London.
Published: March 19, 1989
(...)
OPPENHEIMER’S first attempt to seize control of Gold Fields came on a February morning in 1980, in what executives on both sides refer to as ‘’the dawn raid.’’ For about three months preceding the raid, an investigation by Britain’s Department of Trade and Industry later found, De Beers secretly channeled up to 59 million rand - roughly $147 million - to six Oppenheimer-affiliated companies, instructing them to buy Gold Fields shares on command. This coordinated strategy was used to avoid violating Britain’s Companies Act, which requires any purchase of more than 5 percent in a company to be declared.

At 8:30 A.M. on Tuesday, Feb. 12, Anglo American’s London broker, Rowe & Pitman, was notified to begin the buying blitz. With 30 Rowe & Pitman staffers dialing their telephones simultaneously, Oppenheimer’s six-company consortium grabbed 16.5 million Gold Fields shares -close to 15 percent of the company - in less than an hour.

Google Books
An A - Z of Finance:
A Jargon-Free Guide to Investment and the City

By Michael Becket
London: Kogan Page
1999
Pg. 52:
Dawn raid A sudden spurt of share buying in a specific company, usually to build up a stake for a take-over bid. It takes place at the Stock Exchange’s idea of dawn, about 8.30 am, with the raider being allowed to buy up to 14.9 per cent of the target shares (the maximum allowed by the Take-Over Panel rules) in one fell swoop before the price has time to rise against them.

Google Books
Routledge Dictionary of Economics
By Donald Rutherford
Routledge
2002
Pg. 129:
dawn raid
A method of acquiring the shares of a company popular in London in the early 1980s. A company was taken over by rapid purchase of shares atthe beginning of the working day. Since shares were acquired at different prices, the International Stock Exchange Council has now regulated this technique.

Google Books
Harriman’s Financial Dictionary:
Over 2,600 essential financial terms

By Simon Briscoe and Jane Fuller
Petersfield: Harriman House
2007
Pg. 88:
dawn raid
The practice of buying shares in a potential target, with view to a possible takeover, at the beginning of a trading day in the hope that the rest of the market will be slow to react to the buying spree and that the price will therefore not rise until after the raid is complete. The “raider” will often instruct several brokers to be part of the act. Term is most commonly used in the UK.

Posted by Barry Popik
New York CityBanking/Finance/Insurance • (0) Comments • Thursday, February 17, 2011 • Permalink