This presentation will teach you how to profit from special situations, specifically stock offer for tender.

1. Stock Offer for Tender – Profit with
Special Situations
By Jae Jun
www.oldschoolvalue.comPhoto credit: GotCredit / Foter / CC BY

2. What You Will Learn
• The truth about stock tender offer
• Risks to avoid in stock tender
• What situation becomes an advantage for
the small investor
• Some buy commissions and capital gain
tax information

3. Foreword
How is an
individual
investor able to
get an edge over
millions of others?
Photo credit: Brandon Carpenter / Foter / CC BY-NC-ND

4. How can they find an edge...

5. Especially against institutions that spend every
waking hour analyzing companies and
crunching numbers?
Photo credit: Martin Terber / Foter / CC BY

6. The way to profit is to
know something that
others don’t.
Photo credit: pfv. / Foter / CC BY-NC

7. That is where being
involved in a stock
offer for tender can
help you profit and
beat the market.

8. when it Comes to Offer for Tenders
It’s All About The Odds

10. If an opportunity arises where the odds
are in my favor, I will take it.

11. If a bet came along where I had 60%
of winning and 40% of losing…

12. I would take it
each time
because in
the long run, I
end up
winning.

13. But it depends on
capital allocation
and your own risk
rating..

14. • Pick your spots

15. • Pick your spots
• No blind bets

16. • Pick your spots
• No blind bets
• Calculate the
odds

17. • Pick your spots
• No blind bets
• Calculate the
odds
• the risks and…

18. …timeline when investing in
special situations and stock
offer tenders.

19. What Is a Stock Tender Offer?

20. A stock tender is when a company
announces that it will be buying
back a certain number of shares
at…

21. either a specified price or in the
form of a Dutch auction.

22. But, why
buy back
shares?

23. 1. To reduce the number of stockholders of
record

24. 1. To reduce the number of stockholders of
record
2. reduce or eliminate future servicing fees,
SEC reporting costs and stock listing
fees.

25. 1. To reduce the number of stockholders of
record
2. reduce or eliminate future servicing fees,
SEC reporting costs and stock listing
fees.

26. Smaller companies with a
large base of tiny stock holders
can eat away profits with
administrative tasks.

27. As a real example

28. Jonathon (My Money Blog)
participated in a stock
tender with United Rentals

29. He purchased shares at $19.81
which the company bought back
for $22.

30. Timeframe for this was under 1
month, so the gain of about 10%
is annualized to over 100%.

31. The idea of a company offering a
stock tender is pretty
straightforward, but there are
risks.

32. The Risks of Stock Tenders

33. This is a form of merger arbitrage
but I do believe the risk is lower
than merger acquisitions

34. Now back to the risks…
Photo credit: ~db~ / Foter / CC BY-NC-ND

35. FIRST

36. A company announces that it will
buy back a certain number of
shares

37. A company announces that it will
buy back a certain number of
shares
In the case of United Rentals (URI)

38. 27 million shares were to
be bought back ranging
from $22-$25
Photo credit: hunsonisgroovy / Foter / CC BY-NC-ND

39. Too many people may
tender their shares
w/c can cause over-
subscription
Photo credit: hunsonisgroovy / Foter / CC BY-NC-ND

40. OVER- SUBSCRIPTION:
a situation where your lot
of shares may not be
completely bought backPhoto credit: TexasT's / Foter / CC BY-NC-ND

41. SECOND

42. The company should have
enough cash or have financing
in order to buy back the shares.

43. Just like in risk arbitrage, if the
company doesn’t have the funding,
the tender will get cancelled or
amended to a lower buy back price.
Photo credit: Michael David Pedersen / Foter / CC BY

44. THIRD

45. Management could withdraw the
tender at the last second.

46. Nothing is set in stone when it
comes to special situations.

47. Odd Lot Tenders

48. In case the tender is
oversubscribed, people holding odd
lots of shares under 100 are given
preference when shares are bought
back.

49. This means, if you hold 99 shares and
somebody else holds 100 shares, your
tender is given a higher priority.

50. Those who hold
more than 100 in
an oversubscribed
tender will have
their shares
bought back at a
pro rated basis.

51. Those who hold
more than 100 in
an oversubscribed
tender will have
their shares
bought back at a
pro rated basis.
Thus buying 99
shares ensures
the best return.

52. In some cases, companies
specifically announce odd lot
tenders where they will only buy
back shares from those who hold
less than 100 shares.

53. This is one of the
areas where the
small investors have
an advantage over
the big boys.

54. Some Things to Know

55. Once you purchase shares, you have
to call your broker to let them know you
want to tender your shares.

56. I do all my investing through my 401k
account with Fidelity and they charge
$38 for the tendering.

57. Buy commission of $10.95 and sell
commission of $38 is $48.95 in fees
alone, so choosing your spots is very
important.

58. Don’t forget to factor in the capital
gains tax as well.

59. With numerous
realized gains of
say 10%, the
individual investor is
able to profit in
unstable and
uncertain markets
with minimal risk.

60. This isn’t speculation…

61. and if you give the additional effort
to look for it and read a few
paragraphs from the SEC filings,
your portfolio could do very well.

62. Jae Jun (jae.jun@oldschoolvalue.com)
http://www.oldschoolvalue.com
Old School Value improves your
investment decisions and performs deep
fundamental analysis and valuation for you.
Just like a personal stock analyst.