Odd lot tenders

[writser]

I did nothing there, the arb itself wasn't that big of an opportunity anyway. Couple of Dutch actions going on now, potentially interesting.

[LC]

I did nothing there, the arb itself wasn't that big of an opportunity anyway. Couple of Dutch actions going on now, potentially interesting.

I'm always afraid of the dutch auctions hitting the low end...have you gone through them in the past? in your experience, where does the tender price fall within the range? Any bad experiences?

[infinitee00]

I'm always afraid of the dutch auctions hitting the low end...have you gone through them in the past? in your experience, where does the tender price fall within the range? Any bad experiences?

 

Last year, Chamber Street properties (CSG) had a dutch-tender which went through at the lower end of the offer. From the limited number of dutch odd-lot tenders I have done, my observation is that if the stock trades within the range of the offer, there is a higher probability that it will go through at the upper end, if however, the stock trades below the offer, there is a chance of the offer going through at the lower end. However, like everything else, nothing is guaranteed and YMMV.

 

For dutch tenders, I typically try to buy it near the lower end of the offer and tender it at the lowest tender price, so that typically my upside vs downside is 4:1 or 5:1

 

e.g If the dutch tender offer is say between $95 and $100 and the stock is trading in that range, I try to buy it at around $96 or lower ( if possible, otherwise I might just give it a pass) and then tender it for $95, so that I end up with a possible ~$100 loss vs a ~$400 gain ( provided of course, the tender goes through, which is a risk in itself).

 

 

[jmoy911]

Speaking of odd lot tenders and modified dutch auctions, look at OUTR. Today was the last day to tender and the stock closed at the lower end of the range. Won't know the tender price until Monday.

 

I'm always afraid of the dutch auctions hitting the low end...have you gone through them in the past? in your experience, where does the tender price fall within the range? Any bad experiences?

 

Last year, Chamber Street properties (CSG) had a dutch-tender which went through at the lower end of the offer. From the limited number of dutch odd-lot tenders I have done, my observation is that if the stock trades within the range of the offer, there is a higher probability that it will go through at the upper end, if however, the stock trades below the offer, there is a chance of the offer going through at the lower end. However, like everything else, nothing is guaranteed and YMMV.

 

For dutch tenders, I typically try to buy it near the lower end of the offer and tender it at the lowest tender price, so that typically my upside vs downside is 4:1 or 5:1

 

e.g If the dutch tender offer is say between $95 and $100 and the stock is trading in that range, I try to buy it at around $96 or lower ( if possible, otherwise I might just give it a pass) and then tender it for $95, so that I end up with a possible ~$100 loss vs a ~$400 gain ( provided of course, the tender goes through, which is a risk in itself).

[jmoy911]

We'll know soon enough. It could go either way. The same thing had happened with CXP. The tender was for $22 - $25. At the day of the tender offer expiration the stock closed at $22.50, but the offer still went through at $25.

 

Uh oh looks like I might have hit my first bad tender offer on OUTR  :-\

 

Perhaps this was the cause of the drop?

 

http://tickerreport.com/banking-finance/158691/investors-purchase-large-volume-of-outerwall-put-options-outr/

[wachtwoord]

I skipped OUTR. I kept waiting for it to trade below $70 and since it never did I never bought.

[siddharth18]

This is more of a logical exercise for me, but is it ever possible for the final tender price (in a dutch tender) to be lower than the most recent share price prior to the tender deadline? If the shares closed on 7th March at $68.55, and the tender deadline is by the end of the day - why would anyone choose to sell the shares back to the company at a price lower than $68.55?

 

Does this creates a disadvantage for individual/retail investor who must submit tender instructions (to his broker) a day or two prior to the actual company mandated tender deadline, and hence, has can't wait until the last minute to modify the terms of his tender?

[LC]

I don't know the answer to that, which is one of the reasons I've been passing recently on these dutch auctions where the market price is generally in the middle of the tender range. Hopefully another forum member has some experience.

[Hielko]

Yes, it's certainly possible that the tender price goes below the market price. Happened last year to me I think, but don't know the ticker anymore.

[siddharth18]

Yes, it's certainly possible that the tender price goes below the market price. Happened last year to me I think, but don't know the ticker anymore.

 

I guess it could - in cases whereby a substantial shareholder decides that he'll end up getting a better price in tendering rather than selling it in the open market. And this would mostly due to liquidity concerns, right?

 

In the case of OUTR (Outerwall), JANA partners sold 2 million shares of OUTR to someone, somewhere but not on the exchange it seems. According to this disclosure (http://www.sec.gov/Archives/edgar/data/941604/000090266414001658/p14-0901exhibita.htm) they sold at $68/share which is about $3 lower than the lowest price on the exchange (https://www.google.com/finance/historical?cid=660533&startdata-ipsquote-timestamp=Mar+6%2C+2014&enddata-ipsquote-timestamp=Mar+6%2C+2014&num=30&ei=8NolU-CnEuGv6AGhmQE)

[Guest wellmont]

what I've noticed is that the price of the stock tends to go up and through the tender price in pretty short order, giving you a chance to sell your shares at the price of the tender or more. HAL was an example. that's because the tender is a value creating event. it changes things. it changes the shares outstanding. it changes the capital structure. it sometimes signals institutional intent. so I've learned that it can be more rewarding to not participate, but to hold on. especially if bod and management do not participate. HELE may be a current example of this. what I am saying is that this can be a good area to look for longs.

[jmoy911]

Agreed, I have notice this too for the tender offers that I've participated in. There have been exceptions to this as well, BPI being one of them (Tendered at 19.50, currently in the ~$14).

 

There's some temptation to hold on, but goes against my strategy to buy for the purpose of tendering. Have you held on for higher gains? and if so, how do you differentiate the lemons like BPI/OUTR with a HAL?

 

what I've noticed is that the price of the stock tends to go up and through the tender price in pretty short order, giving you a chance to sell your shares at the price of the tender or more. HAL was an example. that's because the tender is a value creating event. it changes things. it changes the shares outstanding. it changes the capital structure. it sometimes signals institutional intent. so I've learned that it can be more rewarding to not participate, but to hold on. especially if bod and management do not participate. HELE may be a current example of this. what I am saying is that this can be a good area to look for longs.

[Guest wellmont]

this is a new thing for me. I sold 2/3 of my outr. I didn't sell my hele. so it's an experiment at this stage. of course you can put bigger dollars to work by holding. Hanging on through tenders from Malone, Diller and wtm would have yielded satisfactory results. good capital allocators tender when the stock is cheap. so studying management is a key to this strategy working.

[jmoy911]

Did you sell 2/3's of OUTR post tender when it dropped or did you sell it on the lead up to the tender by date? I do remember seeing that some of the management tried to tender some stock at a price of $71-72 but dont remember if that was a material amount of stock for them.

 

this is a new thing for me. I sold 2/3 of my outr. I didn't sell my hele. so it's an experiment at this stage. of course you can put bigger dollars to work by holding. Hanging on through tenders from Malone, Diller and wtm would have yielded satisfactory results. good capital allocators tender when the stock is cheap. so studying management is a key to this strategy working.

[Guest wellmont]

Did you sell 2/3's of OUTR post tender when it dropped or did you sell it on the lead up to the tender by date? I do remember seeing that some of the management tried to tender some stock at a price of $71-72 but dont remember if that was a material amount of stock for them.

 

this is a new thing for me. I sold 2/3 of my outr. I didn't sell my hele. so it's an experiment at this stage. of course you can put bigger dollars to work by holding. Hanging on through tenders from Malone, Diller and wtm would have yielded satisfactory results. good capital allocators tender when the stock is cheap. so studying management is a key to this strategy working.

 

in the tender. I am not certain how the tender at the higher price worked.

[bskptkl]

American Oriental Bioengineering just filed saying they are going private and will cash out all holders of less than 500 shares at .50/shr.  It's at 31 cents . I think I am going to pass on it though.

 

Is anyone familiar with the company?

 

Trades on grey market - maybe that's why no permissions at IB?

 

I bought it in my Fidelity account last week. I had bids in for .30, bids were not reflected because grey market, then one day got filled at .28, 500 shares in all 4 accounts.

 

I know it's Chinese but trades for a fraction of book value and has a 25% owner who seems to want it. I bet it's a decent long. I put it on my "do more work" list. I have found a couple of investment ideas in my portfolio this way.

Update - they filed a PRE14 saying meeting will be March 14 - I figure cash out maybe 20 days later. It's now trading 10 cents. So could be a bagger in 6 weeks from here. Annualize that!

 

Item 8.01    Other Events.

 

 

 

On March 21, 2014, the Board of Directors of American Oriental Bioengineering, Inc. (the “Company”), set March 25, 2014 at 4:01 p.m. ET as the effective date and time of the 1-for-501 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $0.002 per share. The Company’s common stock is currently quoted in the over-the-counter markets. As required, FINRA must review the Reverse Stock Split transaction and set the date to effect the Reverse Stock Split in the market. As of today, FINRA is still in the process of completing its review. As a result, although the Reverse Stock Split will be effective under Nevada law, the effect of the Reverse Stock Split will not be reflected in the over-the-counter market until a date in the future. At such time that the Company is made aware that FINRA has completed its review and set a date to effect the Reverse Stock Split in the over-the-counter market, the Company will provide an update to its stockholders.

 

It's still in limbo in my account...shows split happened but no cash yet.

[bskptkl]

Buy 99 shares HCT for $10.10, cash out at $11 in less than a month.

 

Or wait a while for a better IRR!

 

 

https://www.sec.gov/Archives/edgar/data/1499875/000114420414021248/v373929_exh99ai.htm

 

 

[wachtwoord]

Buy 99 shares HCT for $10.10, cash out at $11 in less than a month.

 

Or wait a while for a better IRR!

 

 

https://www.sec.gov/Archives/edgar/data/1499875/000114420414021248/v373929_exh99ai.htm

 

I bought for $10.29 , easy $70 (of course it drops after I buy).

[jmoy911]

Isn't that always the case?  ;D

 

Buy 99 shares HCT for $10.10, cash out at $11 in less than a month.

 

Or wait a while for a better IRR!

 

 

https://www.sec.gov/Archives/edgar/data/1499875/000114420414021248/v373929_exh99ai.htm

 

I bought for $10.29 , easy $70 (of course it drops after I buy).

[bizaro86]

Does anyone else have HCT in an interactive brokers account? I'd like to submit my tender instructions, but its not showing up in the corporate actions tab. Curious if its showing for anyone else and I need to submit a ticket or if they just haven't populated it yet.

[wachtwoord]

Does anyone else have HCT in an interactive brokers account? I'd like to submit my tender instructions, but its not showing up in the corporate actions tab. Curious if its showing for anyone else and I need to submit a ticket or if they just haven't populated it yet.

 

It's not populated yet. I received an email ~18 hours ago announcing it:

 

IB Corporate Action News

Please take note of the following information relating to a security held in your account.

 

AMERICAN REALTY CAPITAL HEALTH

 

Please be advised that news has been released indicating that AMERICAN REALTY CAPITAL HEALTH will become subject to a tender offer.

 

Just be patient and you'll receive another mail when the corporate action has been enabled in the system (this is how IB handles tenders and other corporate actions which require your input).

[bizaro86]

It's not populated yet. I received an email ~18 hours ago announcing it:

 

Just be patient and you'll receive another mail when the corporate action has been enabled in the system (this is how IB handles tenders and other corporate actions which require your input).

 

Thanks!

[hillfronter83]

Anyone taking a chance with SPLP? The tender range is $16.5-17.5 and stock currently trading at $16.7. Odd lot is less than 100.

[matjone]

I saw that one.  There was a writeup on SA and the author said he thought it would go through at the maximum.  I am not sure how he decided that, but it could be worth a gamble.

[siddharth18]

Anyone taking a chance with SPLP? The tender range is $16.5-17.5 and stock currently trading at $16.7. Odd lot is less than 100.

 

Beat me to it. Good risk/reward here even if your shares don't end up being tendered. Management isn't tendering, neither are some long-term holders, share price is a discount to the NAV. The tender will increase the per-share intrinsic value of the remaining shares/units.

 

http://whopperinvestments.wordpress.com/2014/03/24/splp-dutch-tender-offers-opportunity/

http://seekingalpha.com/article/2087293-steel-partners-holdings-lp-should-it-trade-at-53-percent-discount-to-its-net-asset-value

http://longtermvalue.wordpress.com/2014/01/14/should-i-still-be-holding-steel-partners-lp/

http://longtermvalue.wordpress.com/2014/04/04/1st-quarter-update/