Experiments in Finance Tackles Tender Offers

Recently, one of the bloggers I follow, Experiments in Finance, decided to try investing in tender offers. A tender offer is a special situation that occurs when a company decides to buy back a number of its shares from shareholders for a fixed price or price range. I thought you might enjoy reading about her experiences.

Experiments in Finance put some real money to work in two recent tender offers. These included the Fidelity National Services (FIS) and WebMD Health (WBMD) tender offers. Fidelity National Services had announced back in May that it was buying back $2.5B shares via a dutch auction, with a tender prices range set from $29 to $31 per share. The offer included a preference for odd-lots (holders of less than 100 shares) and was set to expire on August 3, 2010. WebMD Health also had a recent tender offer that expired September 8, 2010 to purchase properly tendered shares at $52. This offer for WBMD also included an odd-lot provision.

Experiments in Finance decided to buy 99 shares of FIS for $27.75 on July 15th.  She then reported on her results by posting, “On August 3rd, the results of the dutch auction were announced, and the tender price was set at the lowest end of $29. Even so, this allowed me to earn $115 in a couple of weeks’ time, or a return of about 4% after fees.”

She then went on to buy 99 shares of WBMD on August 26, 2010 for $50.70.  She was a bit nervous about provision of the tender offer that indicated that the tender offer could be canceled or modified if  “a decrease of more than 10% in the market price for the shares, the Dow Jones Industrial Average, the NASDAQ Composite Index or the S&P 500 Composite Index since the date of the Offer.”  She reported back that this provision was waived on August 30th. Given that the deal went through as planned, Experiments in Finance should have grossed a 2.6% return on that investment.  I’m sure she’ll be reporting her final results on this deal shortly. I received cash in my own account this past Wednesday for the WebMD shares I tendered in the Special Situations Real Money Portfolio.

Where did Experiments in Finance find out about these deals? She wrote the following:

In case you’re wondering, I actually find out about all of my special situations investing opportunities through a subscription to Fat Pitch Financials’ Contributors Corner and have been pleased with the service (and no, I unfortunately don’t receive any benefits from referring to them in this post!) Check it out if you’re curious to learn more. The subscribers there are pretty helpful in offering their experiences, any opportunities they find, and answering questions (such as whether there’s an advantage to tendering early, or at a higher price, or trying to purchase from multiple accounts).

I’m pretty proud of that recommendation. Consider trying Fat Pitch Financials Contributors Corner yourself for a month. Use the discount code FPF5 in order to get a one month subscription for just $10 (it’s normally $15 per month).

One thought on “Experiments in Finance Tackles Tender Offers

  • September 17, 2010 at 6:00 pm
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    The odd lot tender idea is not that scalable. The tender fee sounds low from the article.

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