Tender Offer for Calprop Corp.

This weekend I came across another special situation opportunity. Calprop Corp. (CLPO.PK) has received an offer by its founder and CEO, Victor Zaccaglin to purchase all outstanding shares of the company for $0.65. The offer is good until April 21 and according to the summary sheet I need to contact my broker to take advantage of the cash tender offer.

I was luck enough to purchase 2,500 shares this morning for $0.50 per share in my taxable account. I also tried to buy the shares for my son’s Coverdell ESA, but my limit order was for $0.45 a share and that price proved to be too low. The stock was actually trading for $0.25 last Friday before the tender offer announcement, but it opened today for $0.50.

I learned a few things on this purchase. First, when purchasing after an offer announcement it is important to estimate a reasonable price at which you are willing to purchase the stock and still make a good return on investment given the potential risk. In this case, I estimated that a return greater than 20 percent of my investment would be sufficient to be worth the risk. I tried to get greedy and go for a 30 percent potential gain in the Coverdell ESA with my limit order of $0.45, and I failed to get in on the stock.

Second, I typically use a All-Or-None (AON) condition on my limit orders to control trading costs. However, this time I went without that restriction and my order for 3,000 shares was partially executed, and I got 2,500 for my limit price of $0.50. I believe that if I had used the AON condition that I would not have gotten any shares. Only 14,500 shares traded all day today and the price closed at $0.49, but my remaining order for 500 shares was never fulfilled. These thinly traded small cap stocks are difficult to purchase, and I believe that I still have more to learn in this area.