MINI-TENDER OFFERS:  TIPS FOR INVESTORS

Most investors welcome tender offers because they frequently provide a rare opportunity to sell securities at a premium above market price.  Mini-tender offers (tender offers for less than five percent of a company's stock) – have been increasingly used to catch investors off guard. Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers. They later learn that they cannot withdraw from the offer and may end up selling their securities at below-market prices.

If you've been asked to tender your securities, find out first whether the offer is a mini-tender offer. Mini-tender offers typically do not provide the same disclosure and procedural protections that larger, traditional tender offers provide. When a bidder makes a tender offer for more than five percent of the company's shares, all of the SEC's tender offer rules apply. 

These rules require bidders to:
       Disclose important information about themselves
       Disclose the terms of the offer
       File their offering documents with the SEC
       Provide the target company and competing bidders with information about the tender offer

The SEC rules give investors important protections:
       Change their minds and withdraw from the transaction while the offer remains open
       Have their shares accepted on a "pro rata" basis 
       Be treated equally by the bidder

None of the above rules apply to mini-tender offers.  The only rules that encompass mini-tender offers are Section 14(e) of the Securities Exchange Act and Regulation 14E. 

These rules provide that bidders must:
       Not engage in fraud or deceptive practices
       Hold open tender offers for minimum time periods
       Make prompt payment to investors after the offer closes

Regulation 14E also requires the target company to state its position about the offer by recommending that investors accept or reject the offer. The company may also state that it remains neutral. However, bidders in mini-tender offers don't have to notify the target, the company may not even know about the offer.

Investors need to scrutinize mini-tender offers carefully. Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price. Others make mini-tender offers at a premium, betting that the market price will rise before the offer closes and then extending the offer until it does or improperly canceling if it doesn't.

With most mini-tender offers, investors typically feel pressured to tender their shares quickly without having solid information about the offer or the people behind it. And they've been shocked to learn that they generally cannot withdraw from mini-tender offers.

Here are the steps you should take if you are asked to sell your stock, bonds, limited partnership interests, or other securities through a mini-tender offer:

Find out whether the offer is a mini-tender offer. 
Most bidders won't use the term mini-tender offer. Instead, they may call it a "Solicitation to Purchase".  Ask the bidder (or your broker) what percentage the bidder seeks to purchase. If the answer is less than five percent, you're dealing with a mini-tender offer, and you should proceed with caution.

Get a copy of the offering document. 
Do not make an investment decision until you read the offer disclosure carefully.

Determine whether the bidder has adequate financing. 
Some bidders make mini-tender offers because they can do so at virtually no cost. These individuals often do not have the financing necessary to purchase the shares in the offer. Before you surrender your securities in a mini-tender offer, ask tough questions about the bidder's ability to pay once the offer closes.

Identify the current market price for your securities. 
For stock, you can get price information from many normal sources.  For bonds and limited partnerships, you may need to talk with your broker/adviser because these prices may be hard to find. For limited partnerships, contact the general partner to get a list of firms that buy and sell the limited partnership.

Find out the "final" tender offer price after all deductions are taken. 
In some tender offers, you may get a lower price because deductions are taken from the tender offer price for dividend payments. Some bidders in mini-tender offers fail to disclose clearly that certain fees or expenses may also be deducted from the offer price.

Ask when you'll be paid for the shares you tender. 
Bidders in mini-tender offers sometimes fail to provide prompt payment, sometimes delaying for weeks or months. Before you tender your shares, be sure to find out when the bidder will pay you for your shares.

Consult with your broker or other financial adviser. 
Make sure you understand the terms of the tender offer before tendering your shares. Ask for any additional written information that may be available.

If you want to sell your shares, determine where you can get your best price. 
Check all your alternatives for selling your securities. For instance, compare how much you will receive if you sell through your broker versus the tender offer.

Remember that once you agree to a mini-tender offer, you are probably locked in. 
If the tender offer is for less than five percent of the company's stock, exercise extreme caution. Unlike other tender offers, you generally cannot change your mind after you have tendered your shares in a mini-tender offer, even if the offer hasn't yet closed. In addition, the bidder can extend the tender offer without giving you the right to withdraw your shares. 

If you've run into trouble with a mini-tender offer, act promptly. By law, you only have a limited time to take legal action.

Please note that OldStocks.com does not sell investments or investment advice.  It is highly recommended that you contact a registered investment professional for these services.   Items sold in our catalog are cancelled or obsolete, and only sold as collectible items.

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