Socket Mobile (SCKT) – Odd Lot Tender – 12% upside

7 Comments

Current Price – $3.8

Tender Price – $3.75 – $4.25

Upside – 12% or $45

Expiration Date – 9th of March 2018

No proration for odd lot holders

SEC Filling

 

This is quite standard odd-lot dutch tender. Pay-off depends on how many shareholders tender and at what price points they do it. I do not have position myself, but this tender is interesting from two perspectives:

1) It is quite large – 17.8% of shares will be accepted in the tender.

2) Insiders (holding 27.7% of shares) are not tendering.

This suggests that tender has relatively high chance of being priced at the upper limit and that proration will be low. Thus might be an option to play this not only with odd-lot portion.

For more background on SCKT please see this write-up. Few days ago company reported disappointing Q4 results after which share price dropped to current levels. Estimates were mostly missed due to lumpy orders by their enterprise customers – at least that was the explanation given in the conference call, although one analyst at the end of the challenged this. Q4 results have obviously increased the number of shareholders that will be willing to tender shares.

SCKT is levering up to finance the tender offer – credit facilities have already been arranged.

7 Comments

7 thoughts on “Socket Mobile (SCKT) – Odd Lot Tender – 12% upside”

  1. Stupid question… Why are they even doing the tender in the first place?

    • To lever up the company and increase management’s ownership.
      And also might be to support the share price during the period when quite negative Q4 results were announced – but this would be quite dumb reason to launch tender as management is not cashing out or selling in the open market.

  2. Does the proceeds ariving from an tender offer are subject to the 30% withholding tax on non-US investors? The company’s SEC form suggests so but that would be so ridiculous I want to double check

    • I do not think so. Have a look at Section 13 of the doc. It states quite clearly that tender will be treated as ‘sale of exchange’ for both US and non-US holders. Only in special circumstances 30% withholding would apply.

  3. DT, I have what i suspect is an elementary question for you, (clarification) on the effect of “no price specified’ tenders during dutch tenders. Assume a company is buying back 1,000,000 shares in a dutch tender, (Ie similar to sckt) and they receive 250,000 shares tendered utilizing the “no price specified” option. Are these shares “ignored” by the company during the pricing algorithm such that the price tendered when the 1,000,000 share threshold is crossed is the final price? (in which case they now have 1,250,000 shares at that price so will have to prorate to reduce to 1,000,000. Or, does the company only have to cross the 750,000 threshold knowing there are 250,000 additional shares that will be added?

    thanks

    • My understanding is that ‘no price specified’ is equivalent to tendering at the lower limit.

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