Odd lot tenders

[matjone]

Does anyone here ever participate in them?  How have you fared with it?  Ever have any go wrong?  I have seen some that worked out pretty well for people investing small amounts.

 

One problem I have is that to get a decent position I would need to have several brokerage accounts, which is a pain in the ass and can be costly if you are getting charged annual or monthly fees.

[jay21]

I am interested in people's thoughts on these too.  Seems like a decent way to run up an IRA and avoid short term cap gains.

[matjone]

I saw a couple on a blog a few months ago that worked out well.  I am not sure I am comfortable doing it though.  It's really designed to save the company money, but by doing what I am talking about you are exploiting holes in the system at the expense of the shareholders.

[Tim Eriksen]

The key is to know whether just shareholders of record participate or beneficial shareholders as well.  If you don't have to own shares in certificate form a small investor can make a good return on a small amount of funds.  I haven't bothered doing it in a number of years. 

 

I wouldn't view it as exploiting holes in the system at the expense of shareholders.  They could sell down if the price was that attractive.  The remaining shareholders are benefiting from lower administrative costs.  If the price is low, it is no different than a share repurchase.

[matjone]

Yeah ,  I think the idea is that you have a group of shareholders and some of them are really small, and you buy them out at a pretty good price from their perspective to get them to give up their shares and save the company money.  It seems kind of against the spirit of the thing to come in and buy 99 shares in 10 different brokerage accounts.  I am not even sure this is legal but  this is what I've heard some people say they do.  I've considered trying it and I certainly wouldn't look down on anyone for it or anything.  When you look at some of the tricks I've seen managements or controlling shareholders pull it is practically noble by comparison.

[DTEJD1997]

You can most definitely make money, and even good money at this, but it is not as easy as it sounds.

 

They don't always work out, but they usually do.

 

You've got to have multiple accounts, and you've got to have liquid cash ready to go, and you've got to have patience.

 

If you are set up to do it, and have the time & patience, I think you can make some good returns...

[oddballstocks]

Done a number of them, as Tim says fine print matters.  I learned the record/beneficial holder difference on Phoenix Footwear…

 

The nice thing is if you screw up the loss isn't usually large, if your shares are accepted it's a nice gain.  Sometimes the gains are puny, I've got shares of Sunlink right now waiting for another offer.

 

Sometimes these things take forever to close, six to nine months have happened to me, so that cash is tied up for that long.

 

Most have a gain of a few hundred dollars at most.  The PPG odd lot was pure gold, made over $3k on that one.  Have heard stories of a few other odd-lot honey pots.  One a friend participated in required $40k in capital (I believe) and had a $18k profit attached.

 

Three or four years ago I was determined to participate in every one of these I could.  I did it in an IRA, probably had 25-30% of the IRA tied up in random names the entire year.  It added a few percentage points to my overall performance, those little gains eventually add up.  You can also open tons of accounts and try to scale this.  I have heard that for a family of four over 40 accounts can be opened, but companies are seeming to wise up to this.

[ragnarisapirate]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

[oddballstocks]

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

 

Yes, 2010 was awesome, although the PPG deal will be very hard to beat, very hard..

[Saidal]

What's the best tool/website for screening for odd lot tender offers? Besides JAKK from last year and ALJJ, I haven't seen many. Does CapIQ have a tool for this maybe?

[oddballstocks]

What's the best tool/website for screening for odd lot tender offers? Besides JAKK from last year and ALJJ, I haven't seen many. Does CapIQ have a tool for this maybe?

 

When I was big into these I just had an RSS setup from EDGAR to send them to me.  I believe a tender is part of a 13-something filing, just search on those.

[infinitee00]

What's the best tool/website for screening for odd lot tender offers? Besides JAKK from last year and ALJJ, I haven't seen many. Does CapIQ have a tool for this maybe?

 

Google alerts is a decent tool to find odd lot tenders but it can be spotty. I typically use edgar to find those and tried setting up an RSS feed before. But for some reason it didn't work. So I just search manually. I think you can search with the key words 'odd lot' or 'odd lot tender'. I typically search the forms 'SC TO-I' and 'SC TO-C'. Some closed end funds may also mention their odd lot tender offers in the 'N-23C3A' forms, so you may want to keep an eye on them.

 

 

[writser]

What's the best tool/website for screening for odd lot tender offers? Besides JAKK from last year and ALJJ, I haven't seen many. Does CapIQ have a tool for this maybe?

 

Google alerts is a decent tool to find odd lot tenders but it can be spotty. I typically use edgar to find those and tried setting up an RSS feed before. But for some reason it didn't work. So I just search manually. I think you can search with the key words 'odd lot' or 'odd lot tender'. I typically search the forms 'SC TO-I' and 'SC TO-C'. Some closed end funds may also mention their odd lot tender offers in the 'N-23C3A' forms, so you may want to keep an eye on them.

 

yeah, this is what I do as well. Also the SC13E3 (or something) for going private transactions. These also have odd lot clauses sometimes. For Canada you can search for 'Issuer bid circulars' in SEDAR (link). There are some tax issues here though, so be careful. . I haven't found an easy way for European / Asian countries yet.

[Hielko]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

Assurance America did go private last month. Made a few bucks, but also got a bit lucky: managed to buy a couple of times below the cash-out price and sell above. But it was certainly a bit risky, but risk/reward was still asymmetrical imo.

[Kraven]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

Assurance America did go private last month. Made a few bucks, but also got a bit lucky: managed to buy a couple of times below the cash-out price and sell above. But it was certainly a bit risky, but risk/reward was still asymmetrical imo.

 

Assurance America went dark, but is not private.  There are still public shareholders.

[Hielko]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

Assurance America did go private last month. Made a few bucks, but also got a bit lucky: managed to buy a couple of times below the cash-out price and sell above. But it was certainly a bit risky, but risk/reward was still asymmetrical imo.

 

Assurance America went dark, but is not private.  There are still public shareholders.

When a company stops filing with the sec it's called going private.

[Kraven]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

Assurance America did go private last month. Made a few bucks, but also got a bit lucky: managed to buy a couple of times below the cash-out price and sell above. But it was certainly a bit risky, but risk/reward was still asymmetrical imo.

 

Assurance America went dark, but is not private.  There are still public shareholders.

When a company stops filing with the sec it's called going private.

 

Not in all cases.  In this case, fair enough.  They are also going dark. 

[Guest deepValue]

Odd lot tenders aren't profitable enough to make up for the time spent searching for them; just cheat and wait for Oddball or Whopper to put one in your lap.

[LC]

Odd lot tenders aren't profitable enough to make up for the time spent searching for them; just cheat and wait for Oddball or Whopper to put one in your lap.

Not sustainable though! If everyone had that attitude, nobody would search for them and there would be nobody to "cheat" off of!

[walt373]

I had set up 32 accounts at Interactive Brokers and did a bunch of odd lot tender offers last year and early this year, but IB caught on and asked me to close my extra accounts. It was good money while it lasted. In case you're wondering, some other brokers that don't charge for corp actions are OptionsHouse, OptionsXpress, and Sogotrade, although you have to email them to get them to do the tender for you. Not as nice as IB's online interface.

 

The best ones are the CEF odd lot tenders such as APF and IFN. They pretty much always go through and even if they don't, downside risk is minimal since they are only tendering 5% of outstanding shares and they are unlikely to crater vs. NAV. They also don't have the risks that individual stock tender offers have like needing financing or whatever. Also, they pretty much tender on a scheduled basis, annually or biannually from what I've seen. Usually you can make 5-10% on each one. Last summer there were 5 of these going on at the same time (IIF, MSF, LDF, RNE, TKF, all in July) so keep an eye out for them soon. Here's one coming up: http://online.wsj.com/article/PR-CO-20130408-910127.html?mod=crnews

 

You can set up Google alerts to find them. The wording in the news releases vary so I have a few different alerts. You can look for things like "commence tender offer", "announce tender offer", "repurchase offer", etc. (don't include the quotes in the alerts).

[matjone]

Wow, 32 accounts, that is insane.  Thanks to everyone for the tips.

[infinitee00]

How do you even create 32 accounts?  :) Were these client accounts? I have 3 accounts with different brokerages and yet I buy only from one account for fear of being rejected by the company. Wonder if anyone had theirs rejected by the company when bought with different brokerages.

[walt373]

A lot of busywork haha. Some were like advisor accounts and some individual but I put my real name and info for all of them.

[ragnarisapirate]

I have done a lot of these in the past as well. Even split up the shares- however, do be weary of some of them... When they don't go through, you can be screwed.

 

I generally avoid ones where I think there is a chance it might not happen (say, a terrible business making a last grab at reducing expenses), ones that are based in China (from my fear of the reverse merge cos, and a few other situations... Assurance America is a great example of a company that didn't follow through with it and the price got killed.

 

It seems that a lot of people have grasp on to these things and taken a good bit of the profit out- they used to be real gold mines (2010 sticks out to me)

Assurance America did go private last month. Made a few bucks, but also got a bit lucky: managed to buy a couple of times below the cash-out price and sell above. But it was certainly a bit risky, but risk/reward was still asymmetrical imo.

 

They did recently stop filing with the SEC... however, if you go back far enough in their filings, they had an odd lot tender that didn't work out- it was for a good premium to market, and when they didn't do it, the share price collapsed.

[ragnarisapirate]

A lot of busywork haha. Some were like advisor accounts and some individual but I put my real name and info for all of them.

 

I agree on the busywork... I think that I have like 25 personal accounts through TDAmeritrade for this stuff. I honestly can't remember now. You buy shares in 1, then split them up into all the others (for free) and save a boatload on commissions (and worries about executions).