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.