Cash Offers for Stock (Buyouts)

[sengsational]

I bought FRSH about a month ago and it got a buyout offer which was announced 4/10. These things are really complicated looking when looking at the documentation they post about them, but I think it's pretty simple...they ask you if you want to sell your shares for a fixed price (they're offering $6.45), and if they get enough people that want to sell (I guess it's half of the outstanding shares), then the deal goes through and the people who didn't offer to sell their shares still get the same $6.45.


My question is, what's the advantage of offering my piddling amount of shares? It seems like these deals always go through, and I get the same money as if I'd offered the shares. And it looks like there's the option to sweeten the deal (but I don't know if that happens much).


One could argue that I might as well offer my shares, take my money and put it into something else since the price of this stock is "stuck" at around $6.45 until the cash comes into my account, without chance of going up any more. But the buyers have tipped their hand and they must think it's worth more than $6.45 in the long-term, or couldn't make money buying it for that.


Just wondering if there are any bits of wisdom on the options open to holders of buyout shares.

[copyright1997reloaded]

Quote:

Originally Posted by sengsational I bought FRSH about a month ago and it got a buyout offer which was announced 4/10. These things are really complicated looking when looking at the documentation they post about them, but I think it's pretty simple...they ask you if you want to sell your shares for a fixed price (they're offering $6.45), and if they get enough people that want to sell (I guess it's half of the outstanding shares), then the deal goes through and the people who didn't offer to sell their shares still get the same $6.45. My question is, what's the advantage of offering my piddling amount of shares? It seems like these deals always go through, and I get the same money as if I'd offered the shares. And it looks like there's the option to sweeten the deal (but I don't know if that happens much). One could argue that I might as well offer my shares, take my money and put it into something else since the price of this stock is "stuck" at around $6.45 until the cash comes into my account, without chance of going up any more. But the buyers have tipped their hand and they must think it's worth more than $6.45 in the long-term, or couldn't make money buying it for that. Just wondering if there are any bits of wisdom on the options open to holders of buyout shares.

The stock is selling right about the takeout price. If you think another (unsolicited) offer will come along, hold on. If you don't, sell the shares now and move on down the road (assuming the offer is in cash not stock). (This is because it will be a taxable event.) If the offer is in stock, then decide based on what you think of the new parent (as your basis would be carried over from the prior stock).

[triangle]

I am no expert and know nothing about this offer, but it looks like something happened to the business about 3 years causing its value to have a big drop and now someone is willing to pay a 20-25% premium to what has been trading in the interim. That does not seem like a big premium but they must feel that current holders will accept the buyout/takeover. Maybe it is close to "fair" given that the market has been on an upward trend during the same time frame when the stock has been in a trading zone.

Besides what copyright1997reloaded mentioned I would also take note of expected closing date, your short vs long capital gains implications, and expected broker fees...meaning it might cost ~$5 to sell your position now but it might cost $0 or $30+ (depending on your broker) to handle things if the merger goes through.

I try to keep emotions out of investing but I do get annoyed by the big money guys coming in and getting a better deal than the smaller investors. e.g. this week Buffet getting 10 billion worth of OXY preferred shares at 8% with warrants to convert later, seemingly at the expense of current shareholders (and poor acquisition dealings by mgmt team). Or Michael Dell taking his public company back private some years ago at the stocks low point because shareholders didn't appreciate the value or something like that. I often think these forced offerings do not represent long term share holder interests.

[sengsational]

Thanks for the input. For me, it's only 1000 shares, and it's in a Roth, so no cap gains concerns. It's a cash deal. So I guess it's a trade off of putting the money to work vs the slim chance of a higher price. The latter is also a "vote against" the deal, I guess, but a tiny one.

[CardsFan]

Quote:

Originally Posted by sengsational Thanks for the input. For me, it's only 1000 shares, and it's in a Roth, so no cap gains concerns. It's a cash deal. So I guess it's a trade off of putting the money to work vs the slim chance of a higher price. The latter is also a "vote against" the deal, I guess, but a tiny one.

I think you are on the right course to take the money and run re-invest.

I once had some company stock options that I could have excersized when there was an offer for the company. But the stock was trading below the offer price (maybe 5%, or less), so I decided to wait. Deal fell through, stock price dropped. Ooops. Won't do that again.