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Strategies & Market Trends : Low Price/Cash Ratio Value Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Daniel Chisholm who wrote (336)	2/8/2000 3:02:00 PM
From: Elroy	Respond to of 1931

I would think oversubscription is responsible for most of the spread. If you buy 10,000 shares, and can only unload 6,000 shares at $7, you're then stuck with 4,000 shares of a stock which had been $4 prior to the tender. Not that safe a play. Elroy

To: Daniel Chisholm who wrote (336)	2/9/2000 12:03:00 AM
From: Q.	Read Replies (2) \| Respond to of 1931

Daniel, I don't know for sure why the TSFT spread is so big. The one previous time I've experienced a dutch auction, the stock did not fall after the offer, in fact it rose nearly to the tender price within a day after the offer was announced. The discount lasted only an hour or so. But not this one. One possibility is that TSFT investors are sophisticated, and have assessed the offer, and decided there is a certain risk of the deal being oversubscribed and that the stock will subsequently fall. The other possibility is that the investors are not sophisticated, and that the resulting bargain is being overlooked because the stock is so small and has no analyst coverage. I'm hoping that it is the latter. Unlike the previous case I experienced, TSFT has <1% institutional investors. Which means that shareholders, including me, are all unsophisticated small-fry. A lot of us probably don't understand what is going on, and are just happy to sell the darn stock after it has languished so long. In fact, I was tempted to sell on the sudden spike, until I read the news. I suspect the news was either not read or not appreciated by all the shareholders, hence the selling pressure that keeps the discount wide. You're right. It seems too easy. But just the same, I've made a medium-large bet on this play. BTW, the previous deal I experienced was a tender offer for a smaller % of shares outstanding than in the TSFT case, and it was very slightly oversubscribed. The company decided to just go ahead and buy back the few extra shares. And the price was near the top of the range. The comfort you get here is that the cap of 62% of shares out, that will be bought back, is very high. You could not find yourself holding more than 38% of your original shares, and even that is unlikely because it could happen only if 100% of all the owners in the float responded to the tender offer positively. If you should find yourself stuck owning shares of this company, it's not such a bad deal, because you will own a stable and profitable company operating in its own little niche, with a price/earnings ratio of about 7, thanks to the antidilutive effect of the buyback.

To: Daniel Chisholm who wrote (336)	2/16/2000 10:57:00 AM
From: Q.	Read Replies (1) \| Respond to of 1931

Here's a no-risk way to play the TSFT dutch tender offer: Buy an odd lot of 99 shares. Holders of odd lots will get priority over all other shareholders. Judging from the form SC-TO that was filed with the SEC, it appears to me that regardless of any oversubscription of the deal, holders of 99 shares or less will stand in line first, and provided that they made the minimum offer of $7, they will definitely get at least $7 of cash. The stock is presently trading at an ask of 6 1/8. If you buy 99 shares at 6 1/8, and pay a comission of $20, then receive $7 in March, you will net $107. And you could possibly get an additional $50, if the deal goes through at the maximum $7.50. Well, $107 isn't a big deal, I know, but I've now bought 99 shares in 3 different brokerage accounts, so that makes it a little more worthwhile. I don't see how this can go wrong. I get an 18% net gain in approximately one month, with no risk that I can see. Here's the info from the form SC-TO: In what order will tendered shares be purchased? Will tendered shares be prorated? (See Section 5.).......... . First, Telesoft will purchase shares from all holders of "odd lots" of less than 100 shares (not including any shares attributable to individual accounts under the Telesoft Corp. Profit Sharing Plan) who properly tender all of their shares at or below the selected purchase price; and . Second, after purchasing all shares from the "odd lot holders," Telesoft will then purchase shares from all other stockholders who properly tender shares at or below the selected purchase price, on a pro rata basis, subject to the conditional tender provisions described in Section 6.