Following the spot-on tweet by (X handle @ClarkSquareCap), who deserves credit and gratitude for this small trade idea (and many other fantastic posts and creating so much value for the investment community), it came to my attention that on August 12, 2024, (Psychemedics Corp) announced a plan to “go private”. In other words, Psychemedics seeks to terminate the registration of its stock following the completion of a proposed reverse stock split and to delist from trading on Nasdaq. The announcement follows a somewhat standard logic of reducing the number of shareholder below 300 and pursuing a delisting.

2. Terms and timing

The proposed transaction will involve reverse stock split with a ratio between 1-for-4,000 and 1-for-6,000. The holders of shares in an amount less than the reverse stock split ratio denominator are promised to be cashed out at a price of $2.35 per share for their fractional shares.

Psychemedics also disclosed that the intended transaction is supported by a “fairness opinion” delivered by Mirus Capital Advisors Inc.

It has also been simultaneously disclosed to the SEC that Peter Kamin and his affiliated entities, such as 3K Limited Partnership have purchased up to 1,595,744 PMD shares for $2.35 per share for an aggregate purchase price of up to $3,750,000. Psychemedics will use these proceeds to finance the proposed reverse stock split and the related corporate/legal expenses.

The transaction and the termination of the registration and delisting require the formal approval of Psychemedics’ stockholders. It is contemplated to take place at the Company’s 2024 Annual Meeting of Stockholders, which should take place in the fall of 2024.

3. Small actionable trade

With PMD currently trading between $2.28 and $2.30 as at the date of this post, the small profit between USD170 and USD270 could look like this:

Step 1: Buying 5999 shares of (at or below $2.30 per share)

Step 2: Following the SEC disclosures and the final approved reverse stock split ratio (currently set between 1-for-4,000 and 1-for-6,000). If the final ratio is set to, say, 1-for-5500, sell the 500 shares in the open market (given the expected price convergence, one may expect the price of these 500 shares to slightly increase).

Step 3: Upon the approval of the transaction in the fall of this year and the eventual delisting, collect the $2.35 per share, which should work out to around USD170 for a 1-for-4000 ratio and USD270 for a 1-for-6000 ratio.

4. Final thoughts

It is sad to say goodbye to Psychemedics. I have followed this company and its turnaround efforts for a few years now . Peter Kamin is a highly regarded and - in my humble opinion - a very talented investor. His is deeply invested in PMD and his average share ownership cost is much higher than $2.35.

At this stage, I do not exclude that ignoring the trade described herein, acquiring more than 6,000 shares (i.e. way more than 6,000 shares) and staying a minority shareholder in a delisted privately held PMD alongside Kamin could actually yield great medim to long-term outcomes. As an example, just today Psychemedics disclosed the launch of a new ketamine hair testing service, which should further contribute to the value proposition of PMD’s portfolio.

Finally, earning a meager 2.2% current spread on this trade may simply not be worth your time and effort, especially if you have (as you rightly should be) have more profitable and scalable ideas.

Disclaimer

Not investment advice. Do your own due diligence.

On 23 August, CNB Community Bancorp (ticker $CNBB) has disclosed an offer to purchase up to 145,000 shares (or roughly 6.5%) of outstanding common stock at a fixed price of $38.50 per share. As of August 20, 2024, CNB Community Bancorp, Inc. had 2,219,867 shares outstanding. The announcement is available here.

2. No proration for “odd lot” tender

While $CNBB reserves the right to change the terms of the tender offer, the announcement contains the standard reference to the proration exemption for “odd lots”. This means that tendering shareholders owning fewer than 100 shares, or "odd lot" holders, will have their shares purchased without proration.

The tender offer will expire at 5:00 p.m., Eastern Daylight Time, on Wednesday, September 25, 2024, unless it is further extended. This means that - with sufficient patience and slight market volatility - the holder of 99 shares can pocket a small “free lunch” (currently, the trade “profit” would only work out to around 70 USD).

3. Not investment advice

There is no free lunch in life or investing. Investing is risky. Only 145,000 shares will be repurchased, which in this case could limit the participation / “profits” by arbitrageurs and/or increase the likelihood the tender terms are modified. Do your own due diligence.

In example, the price has almost reached the lower tender band of $22.60 USD, where it makes sense to simply sell the 99 shares pocketing almost the entire tender potential (which is most likely to be the lower range limit)

and placing a new limit order for 99 shares expiring a day or two before the actual tender deadline accepted by your broker. Just an illustration:

This rinse and repeat practice may sound pretty trivial (which it is), and I apologise if it resembles collecting pennies in front of a steamroller (in all honesty, it is actually a fair description).

At the same time, from the education viewpoint, one always needs to check the recent disclosures (such as this one, in $SILA’s case). Are there any recent material events? Is the price move of such a magnitude that it substantially increases the likelihood of the cancellation of or the change in the terms of the tender, such as the modification of the price range or, say, a potential extension of the deadline?

I guess the main takeaway from this unduly lengthy post is that market events and price fluctuations can sometimes create temporary inefficiencies that can be exploited and traded around more than once (or multiple times).

NOT INVESTMENT ADVICE. PLEASE DO YOUR OWN DUE DILIGENCE.

P.S. I must confess I am surprised and honoured to have around 40 new subscribers to my Substack. This newsletter was launched as a part-time project seeking to keep my friends and extended family about some low-hanging fruit being “offered” by the market. The idea was to put out very few well-defined trading ideas - mostly around odd lot tender offers, “going private”, reverse stock split and odd lot split off transactions. The logic behind was that those situations typically have a strong track record of “delivering” profitable trades (hence the arrogant-sounding name “free money investing”). Given that several subscribers have expressed interest in the work I put out, depending on my bandwidth, going forward I will gradually cover some additional situations, which will be riskier than, say, the plain-vanilla odd lots, such as liquidations, squeeze-outs, AIM rule 15 situations, privatisations, etc. etc.

On 13 June 2024, Sila Realty Trust has disclosed an offer to purchase up to $50 million of its shares outstanding in the range between $22.60 and $24.00 per Share, net to the seller in cash less the withholding of any applicable taxes and without interest. The conditions of the offer are available at the SEC EDGAR:

2. Details on $SILA’s odd lot tender

has been volatile today, and I managed to get my order for 99 shares filled at 21.19 USD per share:

Given the volatility, it is highly likely that the stock goes even lower and that the opportunity will persist for weeks:

1. Step one - set a buy LMT order for 99 shares of Sila Realty Trust, Inc. (ticker SILA) at, say, 21.20 USD (or below that) per share. It will require you to put down 2,100 USD

2. Step two - tender your 99 shares at “No Specified Price” by the deadline via your broker (highly recommend Interactive Brokers due to reliability, automation and tender selections being free of charge)

3. Step three - get (22.6-21.2) USD * 99 shares - 1 USD = 137.6 USD profit on your Interactive Brokers account for 5 minutes of work

   

3. Not investment advice

There is no free lunch in life or investing. Markets can change. Investing is risky. I Don’t follow anything written in this post. Close the browser and walk away. Always do your own due diligence.

This will be a short post. I want to get this idea quickly and leave my readers with some room for reading and self-educating. The idea presented herein boils down to the following. For many reasons, publicly listed companies may want to terminate or suspend its reporting obligations and go “dark”.

The key reasons are normally to reduce costs and eliminate compliance burdens. Under the U.S. listing rules, a U.S. company will need to have fewer than 300 stockholders.

This is exactly where “reverse stock splits” kick in. A “reverse stock split” is a corporate action that reduces the number of outstanding shares by merging them into a smaller number of proportionally more valuable shares.

For example, in a 1-for-10 reverse split, every 10 shares are combined into 1 new share with the share price multiplied by 10 to maintain the same market cap.

2. Ashford Inc. ($AINC)

If 1-for-10 reverse split sounds a bit unconventional, think of 1-for-10,000 reverse stock split. This is what Ashford Inc is trying to accomplish through its announced Going Private Transaction.

Now, check out this disclosure:

What it broadly means is that those shareholders holding in one account less than 10,000 shares would be considered “Cashed Out Stockholders” at a fixed price of 5.00 USD in cash per pre-reverse-split share.

With shares trading in the range 4.80 to 4.85 USD per share over the past few weeks, this trade could result in 1,500 USD to 2,000 USD of “risk-free” profit (please refer to the Disclaimer!).

3. Not actionable (at least yet)

There are multiple factors that need to be assessed in these types of situations. Level 1 thinkers would simply conclude that the money is just laying there and one just needs to pick it up.

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.” Jim Rogers

The reality is more nuanced. The spread of 3.1% is too small (at least for now), and since it can still take a few weeks for the Transaction to get through, approved and executed, one’s IRR could be sub-optimal.

Corporate governance is important, and here Ashford Inc has a juicy story to tell.

Based on the current price and SEC filings, the above transaction does not appear to represent sufficiently attractive opportunity. This can, however, change rapidly.

Disclosure: Not a shareholder at this moment.

On 29 May 2024, Talen Energy Corporation (OTCQX: TLNE) announced that it has commenced a modified "Dutch auction" tender offer to purchase for cash up to an aggregate purchase price of $600,000,000 (and, at the Company's option, up to an additional $12,000,000) of its common stock at a price per share not less than $116.00 and not greater than $122.00, less any applicable withholding taxes and without interest, using available cash on hand.

Talen Energy Corp tender offer will have an odd lot provision as described in the Offer to Purchase.

“The Tender Offer will expire at 5:00 PM, New York City time, on June 27, 2024 (the "Expiration Time"), unless extended or earlier terminated. In order for stockholders to be eligible to receive the Total Consideration, such holders must validly tender their Shares at or prior to 5:00 PM, New York City time, on June 12, 2024, unless extended by Talen in its sole discretion (such time and date, as the same may be extended, the "Early Tender Time").”

2. Trade details

At the moment of this writing, $TLNE trades at around 109.5 USD per share. As a rule of thumb, I would not touch the situation if it makes at least 100 bucks per trade or 3% on the invested capital (time can vary - usually over 3 to 4 weeks).

So, these are the steps to exploit the potential market fluctuations in the next few days:

1. Step one - put out a Good-To-Date (ending cob 25 June 2024) Limit order (LMT in Interactive Brokers, i.e. an order to buy shares at a specified price or better) for 99 shares of Talen Energy Corp (ticker TLNE) at, say, 109.6 USD per share. If your order is filled, it will require you to pay 10,850 USD.

2. Step two - tender your 99 shares at 109.5 USD per share by 25 June 2024 via your broker (highly recommend Interactive Brokers)

3. Step three - get (116-109.5) USD * 99 shares - 1 USD profit on your Interactive Brokers account.

4. Interactive Brokers settings

ote that $TLNE is listed on OTC Markets (Pink Sheets) as opposed to a well-known reputable excha

To purchase your 99 shares at Interactive Brokers

you would normally need to have respective trading permissions, which you can change in Settings tab of your client management interface

5. Tendering vs waiting optionality

Normally, within minutes you can tender your 99 shares at a Non-Specified Price (i.e. the 116 USD lower floor specified in the tender documentation):

You can however wish to turn the gyrations of the market in your favour. The tender deadline is 27 June (see above). That’s why I might be waiting till ~ 25 June or so to exploit the optionality of price increase beyond the tender floor of 116 USD, in which case I will sell the shares on the open market.

6. Nuances and risks

Note that $TLNE is listed on OTC Markets (Pink Sheets) as opposed to a well-known reputable exchange and is NOT reporting to the SEC. Hence, the risk of the change of tender conditions, such as change in the price range or deadline extension, are WAY HIGHER than with plain vanilla odd lot tender offers.

Please note that the full details of the tender offer are not disclosed, which is why the tender offer conditions can offer nasty surpises.

Do your own due diligence. Always.

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My first Substackpost - experiment in the making

This is my first Substack post. Many of my friends and family live all over. This is my way to say I care and invite them for dinner or beers paid by tiny market inefficiencies.

I want to get my first post out quickly. So it’s a bit crude but I hope you will get the point.

1. Why this, why now

It’s called odd lot tender offers. I will explain in more detail later. Right now you need to know you can make 170 USD in around 5 days. Almost risk free.

Think of it as a mini personal experiment that seeks to educate my friends and family on how to regularly earn a few hundred bucks with very little work.

2. How to earn 170 USD today

So, these are the steps to make 170 USD of “risk-free” profit:

1. Step one - buy 99 shares of Monster Beverage Corp (ticker MNST) at 51.25 USD (or below 52 USD) per share. It will require you 5,075 USD.

2. Step two - tender your 99 shares at 53 USD per share by 4 June 2024 via your broker (highly recommend Interactive Brokers) - you pay 1 USD commission and tender shares for free

3. Step three - get (53-51.25) USD * 99 shares - 1 USD = 172.25 USD profit on your Interactive Brokers account for 5 minutes of work

3. How odd lot tenders work

It’s a long story. I might do a separate post explaining this in detail. Essentially, everything boils down to the following. Publicly listed companies often reduce their share count via buy backs. They may do so by declaring public tender offers. Some at specified fixed price. Some within the price range. They often include “odd lot” clauses. These clauses say that where the shareholders of that company own less than “odd lot” number of shares (typically its 99 shares), the owners who tender their shares will not be pro-rated during the auction process. This is advantageous because it creates tiny market inefficiencies favouring odd lot shareholders.

4. Not investment advice

There is no free lunch in life or investing. Markets can change. Investing is risky. I Don’t follow anything written in this post. Close the browser and walk away. Always do your own due diligence.

Over time, I might add more background and explanations on the mechanics of odd lot tender offers, reverse mergers, Morris Trust transactions, spin-offs and other special situations.

Hope over time I can teach some of my friends and family how to “fish” and educate them more about financial markets.

On 29 May 2024, Talen Energy Corporation (OTCQX: TLNE) announced that it has commenced a modified "Dutch auction" tender offer to purchase for cash up to an aggregate purchase price of $600,000,000 (and, at the Company's option, up to an additional $12,000,000) of its common stock at a price per share not less than $116.00 and not greater than $122.00, less any applicable withholding taxes and without interest, using available cash on hand.

Talen Energy Corp tender offer will have an odd lot provision as described in the Offer to Purchase.

“The Tender Offer will expire at 5:00 PM, New York City time, on June 27, 2024 (the "Expiration Time"), unless extended or earlier terminated. In order for stockholders to be eligible to receive the Total Consideration, such holders must validly tender their Shares at or prior to 5:00 PM, New York City time, on June 12, 2024, unless extended by Talen in its sole discretion (such time and date, as the same may be extended, the "Early Tender Time").”

2. Trade details

At the moment of this writing, $TLNE trades at around 115.49 USD per share. As a rule of thumb, I would not touch the situation if it makes at least 100 bucks per trade or 3% on the invested capital (time can vary - usually over 3 to 4 weeks).

So, these are the steps to exploit the potential market fluctuations in the next few days:

1. Step one - put out a Good-To-Date (ending cob 25 June 2024) Limit order (LMT in Interactive Brokers, i.e. an order to buy shares at a specified price or better) for 99 shares of Talen Energy Corp (ticker TLNE) at 112 USD (i.e. below 116 USD) per share. If your order is filled, it will require you to pay 11,089 USD.

2. Step two - tender your 99 shares at below 112 USD per share by 25 June 2024 via your broker (highly recommend Interactive Brokers)

3. Step three - get (116-paid price) USD * 99 shares - 1 USD profit on your Interactive Brokers account.

3. Nuances and risks

Note that $TLNE is listed on OTC Markets (Pink Sheets) as opposed to a well-known reputable exchange and is not reporting to the SEC. Hence, the risk of the change of tender conditions, such as change in the price range or deadline extension, are higher than with plain vanilla odd lot tender offers.

Do your own due diligence.

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