Oracle offer holds risks for early takers

The offer's expiration date has been pushed to July 16, but Oracle has the power to extend it further. Investors who don't withdraw their acceptance of the offer may find themselves out of luck should Oracle choose to buy their shares, proxy solicitors say.

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"It's usually small (mom-and-pop) investors who tender their shares early. And if the offer price drops and they don't stay on top of it, the shares are sold at the lower price if they're not withdrawn before the deadline," said Tom Ball, a senior managing director at Morrow & Co., a New York-based proxy solicitor.

Last month, Oracle dropped its PeopleSoft takeover bid to $21 a share from its previous bid of $26 a share, citing a decline in PeopleSoft's market value in recent months. PeopleSoft's share price had fallen steadily since the Department of Justice announced in February that it would block Oracle's takeover bid.

But in the past two days, as the Oracle-Justice Department trial got under way, PeopleSoft's share price has risen 10 percent to close at $19.03 on Tuesday--narrowing the gap between Oracle's offer price. If the price rises past $21, Oracle could choose to buy stock at its most recent offer, forcing shareholders to sell below market value.

"It is very rare to see a tender price lowered. It only happens a handful of times," said Rick Grubaugh, senior vice president with proxy solicitation firm D.F. King & Co. "Retail investors who tendered and hold their shares through a broker should be advised by that broker. But those who use an online brokerage and don't have a broker to advise them, and aren't following the transaction, then they may not be aware of what is happening."

And despite the recent rise in PeopleSoft's share price, Grubaugh noted it is unlikely that Oracle will raise its bid until it's clear the proposed deal will clear antitrust hurdles and opposition from PeopleSoft.

The trial is slated to last four weeks. Oracle is also seeking to remove PeopleSoft's shareholder rights plan, or poison pill, in the Delaware Chancery Court. A poison pill makes it more expensive for a hostile suitor to buy a company, by triggering the release of additional shares of the target company onto the market.

"It's impossible to speculate when Oracle may, or may not, bump up its bid. Until it gets through this trial, I don't know from a strategic point of view if it's necessary to raise it," Grubaugh said.