Odd-Lot Tender Offer

When launching a tender offer the company also can opt to reduce its further administrative burden and cash out various minor shareholders. In this case, the tender offer may include an odd-lot provision. This provision means that holders of 99 shares will get accepted in the tender offer on a priority basis and won’t get prorated. Such situations provide a rather low-risk upside (yet capped) for odd-lot holders as it is very rare for an odd lot provision to get canceled later on. However, with the odd-lot tender offer situations becoming more and more popular recently, the amount of odd-lot arbitrageurs has also increased dramatically. Elevated participation of arbitrageurs, who “exploit” the provision may incentivize companies to re-think the inclusion of the provision. In fact, in the last two years, we’ve already had some cases where an odd-lot provision got canceled or amended in the process (for the above-mentioned reason).

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