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Disclosure: No position in HCT. Long NYRT (pending tender settlement). Watching GSOL.
I’m not going to write about every tender offer I come across with an odd lot preference (take a look at GSOL if you’re looking for one now) unless there’s something interesting to say. The HCT tender paid $11 to tendering holders. However, when I consider the price movement afterwards, I rather wish I had shorted the stock on May 2 instead:
A substantial decline in the share price after a tender offer is a relatively common outcome when companies tender for shares above market value. It can be very difficult to obtain a borrow on stocks with pending tender offers, and the price movement afterwards lacks the certainty of the price offered by the company. However, such a strategy would not suffer from the odd lot size limitation.
As a quick follow-up to the general discussion of odd lot tenders, I thought I’d highlight one other somewhat unusual occurrence that can similarly render the odd lot preference moot. Tender offers are not always oversubscribed, even if they take place above the market price. Continuing the analogy to the current market structure debate, just because a bid/ask spread is quoted does not mean that large quantities are necessarily available for purchase or sale at the NBBO. The depth of book matters too. When a company offers to repurchase shares above the market clearing price, there’s an element of price discovery that takes place: shareholders may not be willing to sell even at the higher price. This is of course extremely difficult to predict. But imagine if you could!
NYRT closed at $10.25 yesterday, the deadline to tender shares via guaranteed delivery for $10.75.
New York, New York, May 13, 2014 – New York REIT, Inc. (“New York REIT” or the “Company”) (NYSE: NYRT), announced today the preliminary results of its tender offer for the purchase of up to 23,255,814 shares of its common stock, which expired at 12:00 Midnight, Eastern Time, on May 12, 2014.
Based on the preliminary count by DST Systems, Inc., the paying agent and depositary for the tender offer, a total of 12,903,858 shares of the Company’s common stock were properly tendered and not properly withdrawn at the purchase price of $10.75 per share, including 1,119,855 shares that were tendered through notice of guaranteed delivery.
Based on the results of the offer, there weren’t 10.3m additional shares willing to sell at $10.75. But with average daily volume of 1.2m shares at a VWAP of $10.62 since listing last month, it would have been possible to accumulate and successfully tender a lot more than 99 shares. Food for thought.