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Beware: Odd Lot Tender Offers

odd lot tender offerStocks are sold in lots of 100 shares. Buying (or owning) less than one hundred shares is possible. When this occurs, the owner is said to have an ‘odd lot’ of shares. I often have odd lots of shares. When I invest in a stock, I do so by the amount I have available to invest – which may or may not be enough to buy a hundred shares of the stock. If you are in my situation, there will be times when you receive an odd lot tender offer.

What Is an Odd Lot Tender Offer?

Typically an odd lot tender offer is an offer by the company issuing the shares. They buy back shares from owners with less than 100 total shares in an account.

The Securities and Exchange Commission allows targeting of shareholders with less than 100 shares for these offers.

Once the company decides to offer an odd lot tender, a letter is typically sent (by the brokerage firm holding the account with the company shares) to the shareowner, specifying the offer.

I recently received one from a well known aerospace company. It contained an offer either to buy back my 58 shares or to let me buy additional shares to make a whole lot.

Why does a company offer odd lot tenders?

Odd lots are expensive for the issuing company.

  • Record keeping and complying with government regulations is expensive.
  • Annual reports and quarterly updates must be distributed to the shareowners,
  • Account information must be tracked,
  • Proxy votes collected, etc.

If there are a lot of shareowners with fewer than 100 shares in their account, the company is spending more money than they wish on record keeping.

In other words, the company is trying to get rid of you, the small shareowner.

Related: 25+ Great Passive Income Ideas (and 6 to steer clear of!)

stock market moneyShould you respond to the odd lot tender offer?

It depends.

If you acquired your shares via merger or spinoff or some other indirect method, you may not have consciously decided to own them. Maybe you really don’t want them, but haven’t wanted to pay the broker fees to sell them. Often odd lot tender offers allow you to sell at reduced rates.

If the offer from the company is a good deal for you and you don’t care to hold the shares you might want to take advantage of it. Sometimes the company will buy the shares back at a premium, giving you more than market value. This, coupled with the removal of a broker commission might be a good deal for you.

Perhaps you are not already a shareowner of the company and you hear about an odd lot tender offer taking place. If the offered price is above what you think market price will be, you might be able to make a quick short term profit… by purchasing at market and then selling back through the tender offer.

This is a risky proposition however, as the market price could rise above the offering price. Then you would either be stuck with a loss or the stock. You also have to consider any fees associated with either the purchase of the sale. An author at Experiments in Finance describes his second try at odd lot tender offers.

The odd lot tender offer – sometimes they make no sense…

If the company is just trying to reduce expenses (at your expense) you probably don’t want to take action on the offer. You don’t typically have to respond to the offer and usually can just keep your shares as an odd lot.

The offer I just got was a pretty terrible deal for the shareowner. The company was not offering a premium price for the shares (instead they offered a weighted weekly average) and were charging $3.50 a share to do the buy back. In addition, they offered the shareowner the ‘opportunity’ to bring their sharelot up to 100 shares by allowing them to buy shares at the weighted average, plus a $3.50 per share fee and a purchase deposit of $82 a share. What a deal! (NOT!!) I would get to pay $85.50 per share PLUS the cost of the shares. Hmmmmm. No thanks.

Related: 8 Ways to Earn a Passive Income Without Rental Properties

Is the company odd lot tender offer final and firm as of the offering?

Maybe, maybe not.

Last year, a veterinary firm (Heska)  offered $8.50 per share for their odd lot buy back and later had to increase it to $9.50 per share.

Sometimes too many shareowners want to sell, exceeding the cash available at the company for the event. Then, some of the shareholders do not get to sell.

Have you participated in an odd lot tender offer? What was your experience?

This post has been written by Marie from FamilyMoneyValues.com. Be sure to visit her site if you’ve enjoyed this post.

Investing

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

35 Comments

  1. I have never participated in an odd lot tender offer, but I will look carefully at them now if I ever am offered one!

    Great article!

  2. good stuff! I have never been offered one and after reading your article, I will certainly check things out first before grabbing the offer.

  3. Never heard of these … but I do know odd lots are harder to handle on the exchanges. They are the last ones settled and sometimes they attract extra commission. You can end up with odd lots after some splits or reverse splits or other less common share distributions.

  4. Never heard of odd lot tender offers before. I own less than 100 shares in almost every one of my holdings because I am throwing hundreds at a single purchase not 5K (if $50 a share).

    Does it have anything to do with which broker you use?

    • No, it doesn’t matter what broker you use. It depends on what the company issuing the stock wants to do. I’ve only had a couple of these in the 20 years I’ve been investing.

  5. Great post explaining the basics of odd lot tenders. The key with these is becoming an investor AFTER a odd lot tender or a tender offer with an odd lot provision has been announced. This creates a great arbitrage investment that is only possible for small investors.

  6. I was just sent a Voluntary Odd Lot offer from Regions Financial (RF) currently trading just above $19/share. The offer is weighted average market – based price per share with a $1.25/share fee (up to $65) with a deposit of $23/share.

    Sounds awful to me, thoughts?

  7. I was just offered an odd lot buyout from Brighthouse -weighted average – processing fee of $3.50 per share. this was part of a spinoff and I only have 3 shares. Doesn’t sound like a good deal to me, but I may still do it to simplify my paperwork

    • Yeah not a great deal, but like you said…it might be worth just getting rid of it so simplify your investments.

      • I also received a letter from Brighthouse. I have one share Right now They said the closing price as of Sept 13 was $40.63 per share of course I know this may change If I sell the one share the processing fee is $3.50 This share is part of a life insurance policy I hv w Metlife Brighthouse is not buying the share Share will be sold on Nasdaq Any questions hv to be directed to Georgeson 8666306708 Checks will be issued through Computershare Trust Co one less item to worry about on tax form Would there be new forms if I decide to do this

        • If it’s tied to your life insurance (and since it’s only one share for $40), it sounds like you may as well just leave it where it is. Also, on a somewhat related note, it sounds like you have a whole life insurance policy. Those are just soooo expensive. If you’re relatively young and healthy, it might be better for you to have a term life insurance policy. Check out this article I wrote about Bestow (https://lifeandmyfinances.com/2019/09/bestow-review-term-life-insurance-for-busy-people/) . Great company, good prices, immediate insurance without a medical exam.

          Have a great day!

      • I only have 5 shares of this offer (sell-off of MetLife insurance or something) so it seems people on this thread are about 50/50 on selling them?

        • Hi Steve. Yeah, it doesn’t sound like much of a deal, but some are still taking the offer. As always, it’s up to you!

      • Just wonder if having 16 shares makes this Brighthouse offer a bit more worth it, notwithstanding the $3.50 per share fee.

        • Hi Joan. I haven’t personally dug into the numbers myself (or seen the odd-lot agreement for Brighthouse), but it sounds like it’s a run-of-the-mill offer. It doesn’t really matter how many shares you have – sounds sub-par.

  8. Great article! I was just ‘honored’ with such an offer from Brighthouse. Your article helped me make a decision not to sell. Thanks much!

    • You’re welcome! Glad it was helpful and could help you make a financially wise decision!!

  9. I just received a letter from Brighthouse Financial offering to buy my 3 shares of stock. I have no idea what this is about; perhaps it has something to do with my Vanguard account but I don’t know where to begin … I don’t want to sign anything before I have some understanding of what’s going on. Should I start by calling Vanguard? Help!

    • Hi Elizabeth. You probably own some mutual funds through Vanguard and through those you’re invested with Brighthouse. If you only own 3 shares, it’s probably not worth messing with. And, based on the other comments on this post, the offer wasn’t all that appealing anyway. If it were me, I’d just ignore the offer.

  10. Apparently Brighthouse has a $60 cap on the $3.50/share fee, which is still underwhelming. However the fee for redemption without the odd lot offer was nearly the price of the share I own. Also, I tried to do it online but oddlotprogram.com/BHF and even oddlotprogram.com did not work. I did it by automated phone for my 3 shares (in two accounts). I learned that I received these shares as the result of a spinoff from mutual funds I owned.

  11. I have 9 shares of Brighthouse conversion from MetLife. Same offer with $3.50 charge per share. I would like your explanation as to why you feel trading them this way is not worthwhile as you have indicated before to similar comments.
    In other words what do you feel are the pro’s and con’s to keep or not to keep.
    Thanks

    • As I understand it, Brighthouse is willing to buy back your shares at full price, less the $3.50/share fee. With some broker fees at $0 per trade these days, this is actually more expensive than if you’d just want to trade the shares at any random moment. So to me, this doesn’t seem like a deal at all. It’s not the worst thing in the world, but just not a deal.

      Hope that helps!!

      • Derek, to clarify, the letter from Brighthouse specifically states this is not a buyback offer; to wit: “Brighthouse is not buying any shares you sell under the Program. Your shares will be sold on the Nasdaq”. The offer is targeting those with less than 100 shares who don’t want the stock and may not have a brokerage account with favorable fees through which to sell it. The sell charge is $3.50 per share. Do you know of a cheaper way to sell one or two shares of unwanted stock when you don’t have a brokerage account?

        • I don’t know of a cheaper way. If you were looking to get rid of the stock, it doesn’t sound like an awful way to do it. Not great, but not awful. Best of luck to you, Mariel!!

          • Thanks, Derek! I dumped the two shares AND found your blog to follow, so I’m a happy camper. 🙂

          • YES!! More good stuff to come! 🙂

  12. My husband has the same offer from Brighthouse conversion for the Met Life insurance shares as Fred and Elizabeth have. We have only 2 stocks. We are down to the wire with time for selling the stock. Tried going online but can’t find where to make the transaction to sell them. We have never intentionally bought stock so are in the dark as to what to do. It doesn’t look like the stock has made tremendous improvement over the last few months, so perhaps there won’t be any big increase in value soon (especially considering what’s going on politically) Please advise. Thankyou.

    • Hi Helen. I’m not certified to tell you what to do one way or the other. But, the overall point is that this isn’t going to make or break your financial picture. If you hate the stock, sell it. If you’d rather hold, then hold it. No big deal either way. Don’t waste the mental calories.

  13. Derek, I just came across this Bright house offer while going thru some of my Mom’s papers. Obvioulsy the deadline has passed to sell these 6 shares thru the offer, but since she has no idea where they originated or are held, how would one Now go about getting rid of them? Contact Brighthouse? Met Life? Its only 6 shares, but at 86 she’d prefer to have all her pennies in one place.. Can you help?

    • Hi Tricia. Does she have whole life insurance? It’s possible that her savings is invested – and into this Brighthouse stock. If I were you, I’d contact MetLife. They should be able to tell you everything you need to know!

  14. I could use some INFO, I was in hospital when I received acceptance card selling Brighthouse, Financial common stock,. My wife put it in folder for 2019 fed. tax assuming it was to be filed. Today as I’m gathering papers to file tax I came across it. I know it say’s you must return form prior to DECEMBER 6, 2019. My question is, can I claim 11 shares valued at $ 446.93, as a loss on my tax ??
    Thank You

    • Hi Eugene. I’m no tax expert – I’d recommend bringing this to your tax-preparer’s attention. But in my opinion… since you didn’t exercise the option to sell, you should still own the shares. Therefore, you didn’t really lose any money. You just lost the opportunity to sell the shares and therefore still own them. Again, that’s my take. Please do your due diligence and get advice from a professional.

      Thanks for reading!!


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