What is a “stalking horse bid”

What is a “stalking horse bid”
This term comes from the idea of a hunter hiding behind a horse to get closer to their prey without alarming it. In business, it is a strategy to set a floor to the bidding process and attract other bidders. It occurs in a situation where a company in financially distressed like in bankruptcy. A potential buyer is selected and they offer the initial bid known as the “stalking horse bid.” This becomes the starting point for other parties if they want to place a bid as a floor is formed in regards to price. It is meant to encourage competition.
We are discussing this term because Overstock.com placed a stalking horse bid for the intellectual property and digital assets of Bed Bath & Beyond. No other bidders exceeded the stalking horse bid, and therefore, Overstock.com won. This deal does not keep the Bed Bath & Beyond stores open, so there won’t be any more of those stores anymore.
Works Cited:
https://www.nbcnews.com/business/business-news/overstockcom-wins-auction-bed-bath-s-intellectual-property-digital-ass-rcna90550
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