A Tender That Was Too Good To Be True


Silly me. First of all, sorry to disappoint those who were interested in what was supposed to be my first tender. I was too worked up about the odds and closing date of the tender that I completely glossed over the finer details. I didn’t purchase anything today and thankfully, it was a “free” lesson.


Silly me. First of all, sorry to disappoint those who were interested in what was supposed to be my first tender. I was too worked up about the odds and closing date of the tender that I completely glossed over the finer details. I didn’t purchase anything today and thankfully, it was a “free” lesson.

As a newbie to the whole tender process, here’s what happened and what I imagined would happen.

What I Imagined Would Happen

As I was trying to find info on tender offers, I came across a press release for Williams Industries (WMSI), “Williams Industries, Inc. Announces Extension of Odd-Lot Tender”.

“Aug 13, 2008Williams Industries, Inc. today announced the Company is extending its current odd-lot tender offer to October 13, 2008. The tender, which has been distributed to shareholders of 100 or less shares of the company’s stock, offers $2.75 per share. The tender was originally scheduled to end on August 18. The extension of the tender was authorized so that those shareholders wishing to participate would have the time necessary to complete required paperwork.”

Odds look tremendous. Buy 99 shares at the current price of $1.56 for $154.44 and tender the shares at $2.75 for a total of $272.25 which results in a gain of $117.81 before fees. After fees, it would have come out to a gain of $68.86 off an initial $154.44 investment which is a handsome gain of 44% within what would have been a couple of weeks.

You might be laughing at a gain of $70, but would you laugh when if somebody buys you a $70 dinner or gave you $70 in gas money?

The Reality

After my initial excitement and sleeping on it, I went to the SEC page and looked up the tender offer document. Things looked really good. The company has a good history of buying back shares and planned to repurchase about 26,000 shares for a total of $71,000. The extension of the tender signaled to me that the company was dead serious about buying back its shares and lowering the shareholder count.

Looking at the other filings, I believe the company wants to go private.

But all good things come to an end. It ended when I read the following line:

“The Company is offering to purchase for cash (the “Offer”) all shares of the Company’s common stock, $0.10 par value per share (the “Shares” or “Common Stock”), held by stockholders that owned 100 shares or fewer as of the close of business on May 7, 2008 (the “Record Date”) and that continue to own such Shares through the expiration date for the Offer”

Stockholders not on record as of May 7, 2008 are not eligible to tender their shares and the extension is merely to accommodate those that had trouble with paperwork. I assumed that anyone who “continued to own such Shares through the expiration date for the Offer” was eligible for the tender.

Lessons Learnt

  • Never completely trust 3rd party press release
  • Don’t forget to go over documents and the important paragraphs
  • Many Over The Counter (OTC) companies have odd lot tenders
  • Companies probably know more about tenders than the average investor
  • You don’t learn these kind of things in business school
  • Some things are too good to be true

Disclosure

No positions held in any stock mentioned

[tags]odd lot, tender, special situation[/tags]

  • Now I understand why I couldn’t figure out what tender offer you were talking about. I monitor tender offers very closely for Fat Pitch Financials Contributor’s Corner and I was pretty confident that there currently wasn’t a very profitable odd lot tender offer in play. You might want to consider joining to learn from our archive of experiences and to cut down on your search costs/time with these deals.

  • That sounds like a better idea haha

  • Jae,

    I was wondering where did you stumble upon the initial news about this tender? Is there a specific site with such announcements?

  • DGI,

    Aside from the Fat Pitch Financials Contributor’s Corner, I don’t know of any. I just perform searches with the proper keywords.

    “Stock Tender” and “Odd lot tender” will provide some results on the publicly announced tenders. I’m looking for some specific sites also. Will provide updates if I come across any.

  • Jae,

    Thanks for the suggestions.

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