|Shares Out. (in M):||31||P/E||0.0x||0.0x|
|Market Cap (in $M):||1,600||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||0||EBIT||0||0|
This is a TODAY ONLY trade.
Buying Credit Acceptance Corporation (CACC) stock at its current trading level ($48.80) is a way to make a quick ~$120. The profit on this trade is capped so it won't make you rich, but hey, $120 is $120 and this is kind of fun trade to consider. And yes, this one's just for the "personal account".
The key to this trade is that the Company is tendering for stock at $50.00 per share and that the tender offer has "odd lot" provisions such that tender acceptances of less than 100 shares are not subject to proration. So, if you buy 99 shares right now at CACC's price of $48.80, you can then tender the shares at $50.00 (without being subject to proration), and capture the $118.80 difference less trading commissions.
Please note that this write-up is for a quick trade which focuses on the event and therefore does not contain any fundamental analysis on the Company itself.
CACC is a provider of auto loans to consumers, regardless of their credit history. The Company offers its financing product through a nationwide network of automotive dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing.
On June 18, 2010 CACC announced that it was commencing a tender offer to purchase up to 4.0 million shares of its common stock (~13% of the Company's 31 million shares outstanding as of May 31, 2010). The key aspects of the tender offer are:
The Company also stated that since 1999, CACC have distributed $399.2 million to shareholders through share repurchases and that while the Company could distribute excess capital to shareholders through dividends, share repurchases provide shareholders with discretion to increase their ownership, receive cash, or do both based on their individual circumstances; a dividend does not provide this flexibility.
All that being said, what's really going on here is that the founder and majority owner (63%), Daniel Foss, is cashing out of some of his stock (he's tendering 15.4 million shares, but obviously will be subject to proration).
"Odd Lot" Provisions
The key to this entire trade is the "odd lot" provisions contained in the tender offer. Key points are as follows:
The Trade and its Return Profile
To take advantage of these "odd lot" provisions one can trade the stock as follows:
Yes, there's always a catch. Never any free money out there.
The tender has a variety of conditions to it (they are all listed on pages 2 and 3 of Schedule TO) under which the Company can withdraw the tender offer. Most of them are "MAC" clauses, such as legal action against the Company, acts of war/terrorism, etc.
However, there is a clause that states that the tender is subject to: "No decline of 10% or more in the market price of CACC common stock or in the Dow Jones Industrial Average, New York Stock Exchange Index, Nasdaq Composite Index or the S&P 500 Composite Index measured from the close of trading on June 17, 2010 shall have occurred".
As of the close on July 16, 2010 the returns on these is as follows:
So, unless we have another "flash crash" today where the broader indicies decline >5.0% in one day, the tender offer should be completed.
Again, this isn't a big money maker, but $120 is $120 and overall this trade looks incredibly low risk.
|Entry||07/19/2010 01:48 PM|
There may be a fee associated with tendering shares, depending on who your broker is. Some charge $30 to tender, some may have no fee.