What's Going On?

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troll's picture
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Joined: 2004-11-29

I am holding in my hands an "Offer to Purchase for Cash" from Home Depot.
They are wanting me to join others in selling our shares.
They'll buy up to 250,000,000 shares for "Not greater than $44.00 nor less than $39.00 per share" until August 16, 2007.
The stock is trading at $37.45 right now.
Seems like it would be free money to buy at the market and tender to HD.
Why is this possible?

troll's picture
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Joined: 2004-11-29

You're just kidding, right?

Big Taco's picture
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Joined: 2006-11-16

I got the same offer the other day. 

troll's picture
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AllREIT's picture
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Joined: 2006-12-16

Devil'sAdvocate wrote:I am holding in my hands an "Offer to Purchase for Cash" from Home Depot.
They are wanting me to join others in selling our shares.
They'll buy up to 250,000,000 shares for "Not greater than $44.00 nor less than $39.00 per share" until August 16, 2007.
The stock is trading at $37.45 right now.
Seems like it would be free money to buy at the market and tender to HD.
Why is this possible?

Dutch Auction Tender.

You offer shares within the price range, and they begin filling orders
from the lowest quote up. You get paid the highest price that clears
the auction.

troll's picture
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Joined: 2004-11-29

joedabrkr wrote:Real simple...you could end up buying a bunch of shares and then have them only partially tendered....so you are taking unknown market risk depending upon how many HD buys back from you and how the stock performs after the tender...
So what do you suggest your client do?

troll's picture
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Joined: 2004-11-29

As far as your idea of buying and tendering, it's like trying to pick up a nickel in front of a bulldozer coming down the street.   Maybe you could buy protective puts but that would probably wash out all or most of your profit.

troll's picture
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joedabrkr wrote: Devil'sAdvocate wrote:
joedabrkr wrote:Real simple...you could end up buying a bunch of shares and then have them only partially tendered....so you are taking unknown market risk depending upon how many HD buys back from you and how the stock performs after the tender...
So what do you suggest your client do?
I have no interest in the company, and any client who listens to me does not have to worry about the details of the tender because they don't own it.As far as your idea of buying and tendering, it's like trying to pick up a nickel in front of a bulldozer coming down the street.   Maybe you could buy protective puts but that would probably wash out all or most of your profit.
None of your clients own HD?
Must not have very many clients.

troll's picture
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Joined: 2004-11-29

It seems to me that if the stock is trading below the lowest tender price that the tender has been oversubscribed.
That then develops into the thought that there will be lots of people who are holding the stock thinking it will be accepted by HD, but it won't.
That then develops into the thought that after August 16th the stock will experience a sharp decline because disappointed shareholders will dump their shares.
So, should I be shorting it now?

troll's picture
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bspears's picture
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Joined: 2006-11-08

Devil, Why don't you call your local Jones guy...I'm sure he'll set you straight on what to do...

troll's picture
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Joined: 2004-11-29

joedabrkr wrote: You know we can't(or shouldn't) post an opinion like that on a public board.  So hopefully everyone(who is registered) will be smart enough to not try to answer your question.
OK, send an email.

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