Current Price –$11.2
Offer Price – $11.5 – $12.17
Upside – 8.5%
Expiration Date – 3rd of May, 2017 (expected)
No proration for Odd Lot Holders (99 shares and less)
Great Elm Capital Corp announced its intention to commence a modified “Dutch auction” self-tender offer to purchase up to $10,000,000 (c. 7% of outstanding shares) of its common stock, at a price per share within the range of $11.50 to $12.17. The tender offer is expected to commence on or about April 3, 2017.
Shares currently trade below the lower limit, so odd lot holders get a risk free $30 + a free option that the tender will be priced at the upper limit.
No proration for odd lot holders
Tendering stockholders whose shares are tendered at or below the purchase price owning fewer than 100 shares, or “odd lot” holders, will have their shares purchased without proration and all other tendered shares will be purchased on a pro rata basis.
Likelihood of the upper limit
Only 7% of the outstanding shares will be purchased, so I expect the proration to be high and most likely the tender will be priced at the lower limit. NAV per share stands at $13.52, thus the company is trading at material discount to BV, which might make some shareholders reluctant to tender (management indicated they will not tender). On the other hand business development companies tend to trade at discount to BV and current 15% discount to NAV might be deserved.