Odd lot tenders

[oplia]

sorry, wrong link http://www.specialsituationinvestments.com/performance-2015/

 

congrats on the returns. they look stellar.

 

how do you tender your shares? i've looked at this type of transaction so basically i'm asking how to go about the actual transactions you've outlined there.

 

does it depend on your broker? i have an online trading account with one of the big 5 CAD banks

 

If you ask specifically about the process of tendering, then it is broker specific. I use IB and have to press couple of buttons to participate in the tender. So check how your broker goes about it.

[Guest Schwab711]

Looks like an awesome blog/service, oplia. I just wanted to point out that the below quote seems misleading. Especially after such a high-performing year where credit/financing was relatively easy to obtain. I'm just always weary anytime "zero risk" is mentioned. LTCM failed because of a similar attitude towards risk (and lots of leverage).

 

Also these trades very low risk and have minimal downside – in some cases zero risk and zero downside.

[Okta]

Keep in mind Scholastic has terminated its Dutch Auction tender recently. Additionally the cited returns do not include cost and are not audited. Often you cannot trade at the low price when tender is announced because there is a price gap.

[writser]

+1. Besides that this guy is just spamming links to his site in order to entice people to open paid accounts. I don't think that's what this forum is for.

[oplia]

Schwab, fully agree. The statement with regards to risk was out of line and corrected now. Thanks.

 

Looks like an awesome blog/service, oplia. I just wanted to point out that the below quote seems misleading. Especially after such a high-performing year where credit/financing was relatively easy to obtain. I'm just always weary anytime "zero risk" is mentioned. LTCM failed because of a similar attitude towards risk (and lots of leverage).

 

Also these trades very low risk and have minimal downside – in some cases zero risk and zero downside.

[oddballstocks]

+1. Besides that this guy is just spamming links to his site in order to entice people to open paid accounts. I don't think that's what this forum is for.

 

Seems like this happens a lot with odd lots and special sits.  Someone will create some service for $5/10/20 a month and it lasts for a bit then folds.  Here's the problem, the returns aren't justified if you're spending $200 a year to 'find' the idea plus another $300-400 in commissions or more.  Some of these trades you're putting up $1k for a $50 return.  If you pay $8 to trade fees reduced your return by 16%, and this isn't a risk free trade.

 

The way to scale this is by buying in multiple accounts, and multiple accounts means multiple commissions.  If you have 10 accounts you're going to be paying $80 for that $500 gain.

 

I participate in these selectively.  But you need to be selective, and you need to be cheap.  These things are small potatoes and aren't scalable.

[writser]

Apart from that these sites potentially kill lucrative opportunities by trying to make an easy dollar through 'selling' these opportunities to idiots. I.e. the tragedy of the commons. If you are too stupid to find these opportunities yourself you should probably not invest in them ..

 

All these websites are basically a scam - they just regurgitate tender offer filings. If you really want to help people just explain to them how to find them yourself.

[oddballstocks]

Apart from that these sites potentially kill lucrative opportunities by trying to make an easy dollar through 'selling' these opportunities to idiots. I.e. the tragedy of the commons. If you are too stupid to find these opportunities yourself you should probably not invest in them ..

 

All these websites are basically a scam - they just regurgitate tender offer filings. If you really want to help people just explain to them how to find them yourself.

 

Yes.  It's as simple as setting up a custom SEC RSS for the filings.  This can be done for any specific filing you're looking for.

 

Killing the opportunities is even worse.  Think of the business model in that regard.  You start a business, and by starting the business you end it for yourself because your business kills your opportunity set.  Very strange.

[oplia]

Yes it is easy to setup RSS and so on, but then you have to track them every day. Service like mine saves time and that is all there is to it.

 

And as for killing opportunities, you are over-exaggerating this. These odd lot trades have been widely discussed everywhere for the last two years (including this forum). Chris deMuth on SA (author with the most following) is continuing to popularize these and posts every single deal for 700+ of his Sifting the World subscribers and then some random ones for the whole SA. And yet even after all this popularization we still have the likes of SNOW trading below the lower limit.

 

If you think this trade is overcrowded and there are not enough opportunities just move on to something else rather than blame the services that allow tracking these deals.

[Hielko]

What aan incredible shortsighted reply, but I wouldn't have expected anything else... Why do you think there are currently no more odd lot tender offers for CEFs? Exactly because they were posted on SA... And yes, we can tank Chris for that, but you are also doing your best...

[wachtwoord]

What aan incredible shortsighted reply, but I wouldn't have expected anything else... Why do you think there are currently no more odd lot tender offers for CEFs? Exactly because they were posted on SA... And yes, we can tank Chris for that, but you are also doing your best...

 

You can't blame a guy for trying to make a profit from a market inefficiency. Aren't we all doing that?

[LC]

What aan incredible shortsighted reply, but I wouldn't have expected anything else... Why do you think there are currently no more odd lot tender offers for CEFs? Exactly because they were posted on SA... And yes, we can tank Chris for that, but you are also doing your best...

 

You can't blame a guy for trying to make a profit from a market inefficiency. Aren't we all doing that?

 

Sacrificing a long-term profit stream for short term gains. Poor investment decision.

[wachtwoord]

What aan incredible shortsighted reply, but I wouldn't have expected anything else... Why do you think there are currently no more odd lot tender offers for CEFs? Exactly because they were posted on SA... And yes, we can tank Chris for that, but you are also doing your best...

 

You can't blame a guy for trying to make a profit from a market inefficiency. Aren't we all doing that?

 

Sacrificing a long-term profit stream for short term gains. Poor investment decision.

 

Sacrificing long term profit for everyone versus short term only for you. Optimize for yourself yields what?

 

Also, if he doesn't someone else will. Prisoner's dilemma ftw.

[oplia]

It seems that some of you still consider odd lots to be a secret known only to a few. Wake up! It was a secret few years ago but now the genie is out of the bottle

Everyone knows it, just not everyone wants to waste time with these things as the gains are tiny on absolute value.

 

There are a few services which concentrate on writing up spin-offs - do you consider these to be cutting the branch they are sitting on as well?

[Ben_S]

Hi all, I had one general question - for those that have done these trades in multiple accounts, how have you gotten comfortable with the legality? Even if you are doing them in multiple structures (e.g., trusts, IRAs, etc), most tender offers seem to say that you only qualify for priority if you are the beneficial owner of no more than 99 shares (regardless of the number of accounts). The risk that you could get in legal trouble for this seems low to me, but I am not sure that it's zero. The SEC has gone after some pretty strange things before, and the definition of "fraud" is very vague. Thanks

[StubbleJumper]

Hi all, I had one general question - for those that have done these trades in multiple accounts, how have you gotten comfortable with the legality? Even if you are doing them in multiple structures (e.g., trusts, IRAs, etc), most tender offers seem to say that you only qualify for priority if you are the beneficial owner of no more than 99 shares (regardless of the number of accounts). The risk that you could get in legal trouble for this seems low to me, but I am not sure that it's zero. The SEC has gone after some pretty strange things before, and the definition of "fraud" is very vague. Thanks

 

 

The issue is not one of legality, rather it's one of integrity. 

 

You are unlikely to get caught, particularly if your shares are held in street name.  If you do get caught, you are unlikely to get prosecuted, but rather your tenders would likely be refused.  And if you are prosecuted, you probably could avoid most adverse outcomes by simply saying that you hadn't read the fine print carefully enough and your over-tendering was therefore errant.

 

But, the real issue is that you need to look at yourself in the mirror every day and be comfortable with what looks back at you.

 

Cheers.

 

SJ

[Ben_S]

Thanks for the helpful reply. If there is any non-zero chance that this is illegal and you could be prosecuted, that is enough to keep me away (regardless of whether you can fight it).

[Guest notorious546]

http://shareholders.fortress.com/file.aspx?IID=4147324&FID=32818397

 

[netnet]

Hi all, I had one general question - for those that have done these trades in multiple accounts, how have you gotten comfortable with the legality? Even if you are doing them in multiple structures (e.g., trusts, IRAs, etc), most tender offers seem to say that you only qualify for priority if you are the beneficial owner of no more than 99 shares (regardless of the number of accounts). The risk that you could get in legal trouble for this seems low to me, but I am not sure that it's zero. The SEC has gone after some pretty strange things before, and the definition of "fraud" is very vague. Thanks

 

 

The issue is not one of legality, rather it's one of integrity. 

 

You are unlikely to get caught, particularly if your shares are held in street name.  If you do get caught, you are unlikely to get prosecuted, but rather your tenders would likely be refused.  And if you are prosecuted, you probably could avoid most adverse outcomes by simply saying that you hadn't read the fine print carefully enough and your over-tendering was therefore errant.

 

But, the real issue is that you need to look at yourself in the mirror every day and be comfortable with what looks back at you.

 

Cheers.

 

SJ

 

Tossing about the words illegality and prosecution, really? 

 

Even under the most stringent circumstances, there is is nothing illegal about this.  It is a civil matter, a contract between two parties.  This is nothing illegal about this. And if it were, which it is not, there is virtually zero chance of 'prosecution'. State and federal prosecutors barely have time to investigate much less prosecute white collar crimes 10x to 100x this size.

 

(I am not going to zero chance, as that to the mathy part of my mind is a really, really hard thing to say.  Is there zero chance that I could be hit by lightening on a clear cloudless day where I live, where there have been 2 thunderstorms in the last 20 years, well no, but there is also not a zero chance the sun will engulf the earth tomorrow. So the answer is the odds are vanishingly small.  Just don't jilt the local DA's daughter.)

[Ben_S]

Are you sure that there isn't an argument that setting up multiple accounts with the intent to have brokers violate the terms of the offer docs could be considered tender offer "fraud"? The definition of fraud seems to be very broad - "the intentional deception of a person or entity by another made for monetary or personal gain."

 

I agree that it seems very unlikely that the SEC would go after you (unless you did this on a massive scale). But it doesn't seem beyond the realm of possibility that they could try to make an example of someone. Please correct me if I'm wrong - I would love for someone to convince me that this is without a doubt legal.

[StubbleJumper]

Hi all, I had one general question - for those that have done these trades in multiple accounts, how have you gotten comfortable with the legality? Even if you are doing them in multiple structures (e.g., trusts, IRAs, etc), most tender offers seem to say that you only qualify for priority if you are the beneficial owner of no more than 99 shares (regardless of the number of accounts). The risk that you could get in legal trouble for this seems low to me, but I am not sure that it's zero. The SEC has gone after some pretty strange things before, and the definition of "fraud" is very vague. Thanks

 

 

The issue is not one of legality, rather it's one of integrity. 

 

You are unlikely to get caught, particularly if your shares are held in street name.  If you do get caught, you are unlikely to get prosecuted, but rather your tenders would likely be refused.  And if you are prosecuted, you probably could avoid most adverse outcomes by simply saying that you hadn't read the fine print carefully enough and your over-tendering was therefore errant.

 

But, the real issue is that you need to look at yourself in the mirror every day and be comfortable with what looks back at you.

 

Cheers.

 

SJ

 

Tossing about the words illegality and prosecution, really? 

 

Even under the most stringent circumstances, there is is nothing illegal about this.  It is a civil matter, a contract between two parties.  This is nothing illegal about this. And if it were, which it is not, there is virtually zero chance of 'prosecution'. State and federal prosecutors barely have time to investigate much less prosecute white collar crimes 10x to 100x this size.

 

(I am not going to zero chance, as that to the mathy part of my mind is a really, really hard thing to say.  Is there zero chance that I could be hit by lightening on a clear cloudless day where I live, where there have been 2 thunderstorms in the last 20 years, well no, but there is also not a zero chance the sun will engulf the earth tomorrow. So the answer is the odds are vanishingly small.  Just don't jilt the local DA's daughter.)

 

 

Not too sure what to say, other than did you actually *read* what I wrote? 

 

I said that somebody tendering from more than one account is unlikely to get caught...and then in your post you said the same thing.

 

Then I said that somebody tendering from more than one account is unlikely to get prosecuted [for fraud] but rather would likely just have their tenders refused if caught....and then you said there is virtually zero chance of 'prosecution', which is the same thing.  The refusal of the tenders would be the most likely outcome because who the hell initiates civil action for a series of transactions that typically amount to less than $10k gross?

 

You then go on to say that the mathy part of your mind won't drop the probability to zero...and on that I would agree.  But, I would simply add (and I did add) that even if that de minimis risk does translate into legal action, you just plead ignorance and the consequences are likely to be trivial.

 

So, what puzzles me is why you took such a condescending tone in your post?  As I said, the issue is not primarily one of illegality, but rather personal integrity.  Chances are that no adverse consequence will befall somebody who violates the conditions of the tender, but on the other hand it *does* say something about the person who conducts himself in such a manner.

 

Cheers.

 

SJ

[Guest notorious546]

http://latticework.com/ross-taylor-explains-how-to-look-at-the-cannibals/

[fishwithwings]

What aan incredible shortsighted reply, but I wouldn't have expected anything else... Why do you think there are currently no more odd lot tender offers for CEFs? Exactly because they were posted on SA... And yes, we can tank Chris for that, but you are also doing your best...

 

Agreed. 

[oddballstocks]

I gather several people on this board read "beneficial owner" in the offering documents to have a meaning similar to that used for FDIC insurance limits calculations and so have a multitude of accounts of different types with different brokers.  While that is not my view on the meaning of the language, those that do take that view may want to know that I was just told by Fidelity that "several transfer agents met with us 8 days ago" to discuss how they'll be asking for more information about accounts requesting odd lot preference.

 

The Fidelity rep said they'd be complying and provide any information requested.  Not sure how reliable the rep's info was or what transfer agents might ask for but figured I'd pass it along.

 

Have heard through the grapevine of companies where the CEO prints out the shareholder register and manually matches up like names and addresses and excludes them from odd lot offers.

 

 

[Brice]

Have heard through the grapevine of companies where the CEO prints out the shareholder register and manually matches up like names and addresses and excludes them from odd lot offers.

 

I'd like a list of those companies.  Not that I know if it would make me bullish (attention to detail), bearish (best investment of his time?), or downright suspicious (the big CEOs I've dealt with always delegate the details of their financials but fraudsters never do.)

 

Seems like they're potentially looking for trouble too.  Similar last names at the same address can easily be different beneficial owners.  Same name at same address though?  Guess it's possible but rare.