Purchased AutoNation – Odd Lot Tender Offer

A member of Contributor’s Corner sent me information on AutoNation (AN) this past weekend. I reviewed this stock on Monday morning, and I soon realized this stock offers me a good opportunity to experiment with an odd lot tender offer. 

Tender offers refer to when a company or outside investor offers to directly buy a large block of stock from current stockholders at a given price or price range by a certain date.  Odd lot tender offers refer to the particular situation when the company gives preference to shareholders owning less than 100 shares.  This insures that all your shares are tendered even when the tender offer is oversubscribed, meaning that more shares are being tendered than the buyer wants to buy.  Non odd lot shareholders have their shares tendered on a prorated basis in an oversubscribed situation.

Back to AutoNation, I put in an order for 99 shares with a limit order of $21.85 before I headed off to work on Monday.  I shared this trade with my subscribers yesterday, but I thought since this is a new experience for me that I should share it here with you as well.  If you are interested, there is still plenty of time to get in on this deal. AutoNation even closed today lower at $21.79.

Let me briefly describe the details of this transaction. AutoNation (AN) is buying back up to 50 million shares for $23 a share. This tender offer expires on April 12. Odd lot owners will not be prorated. Odd lots will receive preference when being cashed out. I recommend that you review the SEC filing for the details. At $21.85, I plan making a potential gain of 5.3% before commissions and fees.

I normally would have bought this stock in my model portfolio, but that account is out of cash. Instead, I bought these 99 shares in my Roth IRA. Since this stock is my first odd lot tender offer, I will be watching it very closely and reporting my experience here at Fat Pitch Financials.

6 thoughts on “Purchased AutoNation – Odd Lot Tender Offer

  • March 15, 2006 at 10:43 am

    Be careful with the fees. They can be steep. Fidelity charges $38 if you are not a gold level customer. Also, with Fidelity you have to tender at least one day before the expiration date and the trade has to have settled prior to the day you give Fidelity tender instructions. I’ve done a number of tender offers; almost all have worked out favorably and the cash is typically received about 10 days after the expiration date.

  • March 15, 2006 at 8:02 pm

    Fees are an issue. That’s why I don’t use Fidelity. A low cost broker like Firstrade gives you a lot more flexibility to take advantage of these opportunities.

  • March 23, 2006 at 11:50 am

    Just got my 99 share this morning at 21.70. Ameritrade already proceed to process the tender offer for me. Thanks for the tip. Also, those who has Ameritrade and is an Apex account member (active trader or has substantial equity), the $30 fee is waived. Lucky me, quick $130 turn around in 20 days. Works out to be 100% return annually.

  • March 23, 2006 at 11:27 pm

    Hi Jim –

    Thanks for the update. Firstrade told me that they couldn’t process the tender offer yet. Hmm… I might have to call them, because I don’t think the email I received from them is correct.

  • April 8, 2006 at 11:07 pm

    What are the tax ramifications of an odd lot tender?

  • August 12, 2007 at 11:20 am

    Acosta Financial offers odd-lot tender offers for any security that trades with a cusip #.

    The only fee is a per share processing fee.

    Have your broker communicate with them at 305-579-9705

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