Odd-Lot Tender Offer – $87 Upside
Yet another odd-lot opportunity for some ice-cream money.
SILA is a triple net REIT focused exclusively on healthcare properties. Just last week the company completed a direct listing on NYSE which opened up liquidity and exit opportunities for SILA shareholders (before that the company was repurchasing shares only “due to death and involuntary exigent circumstances”). Naturally, such a transaction created quite a big selling pressure by the pre-listing shareholder base. To mitigate potential volatility and to support the stock price, SILA has simultaneously launched tender offer to repurchase around 4% of outstanding shares at $22.6-$24.0. Odd lots will be accepted on priority basis. The offer expires on July 19. Shareholders will also receive a monthly dividend of $0.1333/share (July 1 record date).
The stock is currently sitting slightly below the lower tender limit. This is often the case in similar direct listing + tender setups. I wouldn’t be surprised if during the remaining tender period the stock drifts even lower due to continued selling pressure. At the current price odd-lot holders can pocket $87 per account.
The risk of transaction getting cancelled/amended is virtually zero – the stock would crater if that happened, which does not bode well for a freshly listed entity.
Management is not tendering, but it owns <1%. There are no major shareholders on the register.
While I think the offer is most likely going to end up oversubscribed and priced at the lower limit, it’s worth noting that the company seems relatively inexpensive vs its peers:
A nice overview of the business is provided in this investor deck. Management is focused on expanding scale and indicated that the direct listing to NYSE was done primarily to improve access to capital markets for the purposes of growth.
Note: Sila Realty actually had an extremely illiquid OTC listing with the ticker CVMCA, but company’s 10K still indicated that there is “no public trading market for the shares”.
They have a 10% fall condition (“no decrease of more than 10% in the market price for the Shares or in the Dow Jones Industrial Average, New York Stock Exchange Index, Nasdaq Composite Index or the Standard and Poor’s 500 Composite Index measured from the close of trading on the date of this Offer to Purchase to the open of trading on the Expiration Date, shall have occurred”).
The close price on 13-Jun-2024 was 22.70 (10% fall = 20.43).
“The risk of transaction getting cancelled/amended is virtually zero – the stock would crater if that happened, which does not bode well for a freshly listed entity.
Management is not tendering, but it owns <1%"
Would it be possible to further explain what makes you so confident that they wouldn't invoke the 10% clause? Isn't it pretty common for insiders to sell shares as soon as e.g., lock up periods expire and for stocks to tank around that time? Though, I note your comment about management not tendering. I just sense there is a lot of experience/insight in your comment and wanted to understand the basis of it better.
This is a slightly different tender from the usual ones.
– usually the purpose of the tender is to either return excess cash to shareholders or repurchase undervalued shares.
– in this case the whole purpose of the tender is to support the share price for a newly listed stock.
The 10% condition is a standard one that comes in almost all of the mergers. It has been used only in a handful of cases (covid sell-off in March 2020 being one of those times) even for the more usual tenders.
In case of SILA invoking such a condition would kill the whole purpose of the tender. Share price would crater and management’s reputation would be damaged right out of the gate. That’s why I am saying that the 10% share price drop condition will simply be ignored.
Even if management owned 0% equity in SILA, they would still have incentive to make this public listing work if they have any hope of raising new funds (and earnings more management fees) in the future.
The way it work (similar to Blue Owl-ODBC or Oaktree-OCSL, for example) is that manager will raise SILA II, III, IV.. as non-traded vehicles, and then once the funds are fully deployed, merge the portfolios into SILA in exchange for newly issued shares, to provide liquidity to LPs.
This route won’t work if SILA chronically trades significantly below NAV.
Has anyone managed to tender their odd lot in IBKR?
I messaged them today…
________________________
Dear
Kindly note the event is currently being reviewed by our corporate actions team.
Upon approval all eligible shareholders will be notified and instructed on how to submit their election.
Kind regards,
IBKR Client Services
Just a small trade alert for anyone interested: shares trading at $20.25 as I’m typing this.
anyone seeing this in schwab’s web platform for submitting instructions? (or CI Financial)? I haven’t and was really hoping i didn’t have to call as i’m overseas at the moment.
Nope, haven’t seen any broker send through the election yet.
Vanguard’s corporate actions system is forcing you to enter a bid price when making your tender. It won’t allow you to enter text like “purchase price tender”. It’s only accepting numeric amounts in this field. Anyone else having this issue?
Just got the same from Saxo. Has anyone encountered this before?
Instrument: SILA:xnys (ISIN: US1462805086)
Event Id: 9246160
Ex Date: 17-Jul-2024
Reply Deadline: 16-Jul-2024 21:00:00
Pay Date: Unknown
Narrative
Additional text
Tender offer
Announcement text:
Option 1- odd lot pref – specified price.
Minimum price – USD 22.6, maximum price – USD 24, bid interval rate – USD 0.2 (example – USD 22.6, USD
22.8, USD 23 etc upto maximum price USD 24) ***if price is not specify than your elections will be rejected***
Option 2- unconditional tender – specified price.
Minimum price – USD 22.6, maximum price – USD 24, bid interval rate – USD 0.2 (example – USD 22.6, USD
22.8, USD 23 etc upto maximum price USD 24) ***if price is not specify than your elections will be rejected***
1) offer details:
The company offers to purchase up to the maximum tender amount of its issued and outstanding common
stock at a net price per share, to be determined pursuant to a modified dutch auction procedure, less any
applicable withholding taxes and without interest, upon terms and conditions.
Tenders not submitted in valid increments will be rejected.
(2) price determination:
The company will determine the single price per share within the given range (the purchase price) that they
will pay for shares properly tendered and not properly withdrawn in the tender offer, taking into account the
total number of shares so tendered and the prices specified by the tendering stockholders.
The company will select the lowest purchase price that will allow them to purchase an amount of shares equal
to the tender cap.
The company will purchase at the purchase price all shares properly tendered at a price at or below the
purchase price and not properly withdrawn, on the terms and subject to the conditions of the tender offer,
including the odd lot and proration provisions.
The company will not purchase shares tendered at prices greater than the purchase price.
The company will not accept shares of common stock subject to conditional tenders, such as acceptance of all
or none of the shares of common stock tendered by any tendering stockholder.
The company is not offering to purchase, and will not accept, any fractional shares in the offer.
Tenders of shares for which a price is specified below the minimum offer price or in excess of the maximum
offer price will not be accepted and will not be used for the purpose of determining the clearing price.
(3) stock details:
On june 13, 2024, the company shares were listed on the new york stock exchange (the nyse) and began
trading under the symbol sila.
Because june 13, 2024, is the first day on which the shares traded on the nyse, the company cannot provide a
market price for the shares.
(4) odd lot:
The term odd lots shall mean all shares properly tendered prior to the expiration date at prices at or below the
purchase price and not properly withdrawn by any person, referred to as an odd lot holder, who owns fewer
than 100 shares.
To qualify for this preference, an odd lot holder must tender all shares owned by the odd lot holder.
The company will accept odd lots for payment before proration, if any, of the purchase of other tendered
shares.
This preference is not available to partial tenders or to holders of an aggregate of 100 or more shares, even if
these holders have separate accounts or share certificates representing fewer than 100 shares.
Holders should review offer terms regarding proration, rounding and priority of purchase.
“clients are advised that instructions submitted for non default option can’t be changed or amended after
deadline is passed.
Further, clients are advised to not to sell the holdings once they instruct to exchange.
Holdings instructed to exchange will be blocked for trading.
Any charges or fee for the failed trade will be passed to clients.
In the case where scaleback of exchange occurs, holdings not accepted will be unblocked and proceeds for the
accepted exchange instructions will be booked as soon as practical upon receipt from the agent.
We hereby inform the client that, according to the laws of the country of its incorporation or the laws of the
country of residence of its customers and the laws applicable to an issuer of securities which are subject to
corporate actions, the client, will decide to participate or not to such corporate actions upon its sole and
exclusive discretion and judgement.
The client will bear any detrimental consequence arising out of or connected to such instruction.
For the avoidance of doubt, any information in relation to the corporate actions sent to the client may have
been obtained from sources which are not under the bank’s control and accordingly, the bank shall not be held
responsible for the truth and the accuracy of this information.
Please refer to the prospectus of the event for any further details.”
Option 1
Additional text
Odd lot-no preference specify price.
Tender odd lot (1-99) kindly specify the auction price.
(less than 100 shares and specify auction price).minimum price – USD 22.6 maximum price – USD 24 bid
interval rate – USD 0.2 (example – USD 22.6, USD 22.8, USD 23 etc upto maximum price USD 24) if price not
specified instructions will be rejected
Option 2
Additional text
Unconditional tender – specified price kindly specify the auction price.
Minimum price – USD 22.6 maximum price – USD 24 bid interval rate – USD 0.2 (example – USD 0.2, USD 22.6,
USD 22.8 etc upto maximum price USD 24) if price not specified instructions will be rejected
Seeing similar on Fidelity. Have to call in, but will require tender price.
IBKR now have the tender up on accounts. Same situation as other brokers above re requiring a tender price
Can you check yours again & see if you can actually allocate to “Submit shares for tender at bid price”. ?
On my acc, it is greyed out & I can only allocate to “Take not action”.
Thanks,
1 (Default) Take no action
2 Submit shares for tender at bid price
I am seeing the same. Guessing they will fix it at some point.
It’s poorly formatted.
Press on “change” (regular text) and a popup should come allowing you to allocate shares to the tender option.
Do we not achieve roughly the same outcome by tending at the lower limit? I thought everyone gets bought at the final purchase price anyway. If so, then tendering at the lower limit just increases the chance that the purchase price is lower than it would otherwise be.
More people tendering at the lower limit vs not indicating any price won’t increase the chance of lower pricing.
When determining the lowest possible clearing price in the auction, anyone not indicating a price is counted as willing to tender at the lower limit.
Okay, agreed
For an odd lot person (99 shares) who selected “odd lot priority”, has anyone ever indicated the lower limit—versus not indicating any price—and because of that not had all their shares successfully get bought? Thanks!
I have Schwab and it was very easy. I chose the option to tender with a bid, then there was a drop down choosing the price from the min to the max in 20 cent increments. I chose the price clicked submuit, and the shares were gone from my account.
Thanks. So if you tender before ex date, do you still get the dividend?
To receive the dividend, you must be a shareholder of record as of July 1. Regardless if you tender or not, you will continue to stay shareholder till your shares are accepted in the tender at the tender expiration date (July 19). Therefore, if even you tender before July 1, you will still receive the dividend.
Any tax consideration here? wanted to see if I can do this tender in my normal taxable account.
Thanks.
i.e. how much of the proceed is deemed dividend and return on capital?
Shares accepted in this tender will be treated the same way as a sale, i.e. capital gain taxes on the difference between sale/purchase prices.
@dt:
Not necessarily. Depends on whether you submit a form showing that you pass a Section 302 test, such as your position is completely eliminated in the tender (true for odd lots). With these tenders lately I’m having divided tax withheld on the entire amount until I submit the 302 form and get the tax refunded.
Has anyone correctly tendered their shares on IBKR? I only can choose 2 options, one being to do nothing and the other to bid at a specified price, but then, when trying to only input the amount of shares (99), leaving the price blank, it does not let me proceed further. I’m waiting for a reply from the support, but maybe someone else here had a similar issue?
Hey, here’s what I got back from them after encountering the same issue.. Give that a try
Dear Mr. XXX,
Please be advised, there is small button next to the quantity field in option 2 that says Change.
You must click on this field to enter a bid price before you can enter a quantity.
Same here. Wouldn’t inputting 22.6 as the bid price be the same as leaving it blank?
Anyone figure this out yet? Should we be inputing 22.6?
Yes, on IBKR you have to enter a price and then hit the grayed out “change” button to allocate your shares. It is poorly formatted being gray rather than blue. See Moose’s comment above.
Putting the lower limit is the same as doing a purchase price tender. The docs say everyone gets bought at the final purchase price, which could be higher than 22.6
Why would it be the same? Placing a lower limit skews the allocation towards the lower end. For example, all offers entered at 22.6 count towards that specific bucket. In contrast, a purchase at bid means those orders are matched at the bid price, not contributing to a specific bucket. This difference is crucial because it affects how the final purchase price is determined and how orders are allocated across different price points.
This is explained above by Snowball
Does anyone know what the final offer price is?
$22.60
Based on the preliminary results by Computershare Trust Company, N.A., the depositary and paying agent for the Offer (the “Depositary”), approximately 4.7 million shares of common stock were validly tendered at the final purchase price of $22.60 per share and not properly withdrawn.
In accordance with the terms and conditions of the Offer, and based on the preliminary results reported by the Depositary, the Company expects to purchase approximately 2.2 million shares of common stock at a purchase price of $22.60 per share, for an aggregate cost of approximately $50 million, excluding fees and expenses relating to the Offer.
Based on these preliminary results, the number of shares of common stock that the Company expects to purchase in the Offer represents approximately 3.9% of the total number of shares of common stock outstanding as of July 19, 2024. Immediately following payment for the shares of common stock purchased in the Offer, the Company expects to have approximately 55.0 million shares of common stock outstanding.
Due to the oversubscription of the Offer, based on the preliminary results described above, the Company will accept for purchase on a pro rata basis approximately 42% of the shares of common stock properly tendered and not properly withdrawn at the purchase price of $22.60 per share (other than “odd lot” holders, whose shares of common stock will be purchased in full on a priority basis).
The number of shares of common stock expected to be purchased by the Company, the purchase price information and the proration information are preliminary and subject to change. The preliminary information contained in this press release is subject to confirmation by the Depositary. The final number of shares of common stock to be purchased by the Company, the final purchase price information and the final proration information will be announced following the completion by the Depositary of the confirmation process. Payment for the shares of common stock accepted for purchase under the Offer will occur promptly thereafter.
Shareholders who have questions or would like additional information about the Offer may contact the information agent for the Offer, Georgeson LLC at (866) 643-7359, or the dealer manager for the Offer, Wells Fargo Securities, LLC at (800) 645-3751.