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What you fail to consider is that when Cerberus buys 30% of the shares, that means almost 64M shares are taken out of circulation. With each share of stock sold, there is a buyer that believes the stock is undervalued. Your assumptions are based on a belief that Cerberus only buys stock that is at its peak. What investor says, "This stock is fully valued, I'll buy $250M please?" The share price will go up over time because there are less share available (64M) and a belief in a turn-around which I think Cerberus will accomplish. Short-term and after the tender, I do expect the price to drift below $4. I intend to tender whatever they'll take, and then buy when it dips again. There has been significant shorting of this stock the last year(40%). I think that will help in pushing the price down at letting me in again at something less than $4. Some shorts will linger for a while but long-term(2-3 years), this stock is a double at least.
Ok, this tender if different from a tender that a company buys its own shares. When a company buys its own shares means the income will go higher since there will be less shares. In this case, the tender does not help income and the price should come down to where it used to be or under $3.
I'm not making price predictions, but I would challenge your assumptions as well. Cerberus is not buying Supervalu shares. It is a newly formed investment group "Symphony" and they will buy a maximum of 30% and a minimum of 19.9%
Those shares are on the opne market. They can be resold as quickly as they are bought. This is not like a company buy back of shares whereby the float is reduced. There is actually a possibility that shares will have to be issued so that they can meet the minimum 19.9%
I don't believe that there will be a huge number of shares tendered. I may be wrong, but most guestimates from the MB crowd is from the perspective of short term holders that have bought since the meltdown in hopes of a buyout. I think that many are surprised that the tender was only for a maximum of 30% and only for $4.
Regardless, I contend that there are still many true longs that are averaged in at a much higher cost than $4 and will not accept the tender. The other side of that is ofcourse... To accept the tender is to surrender shares and exit all or part of your position. Accepting the tender would indicate that one does not have confidence in the stock to meet or exceed the tender price.
1) Cerberus can't sell their shares in the open market for at least two years. There are transfer restrictions in the purchase agreement. Please read before you misinform more people.
2) Explain your assumption that investors with a cost basis of more than $4 will refuse to tender. Do they believe if they squeeze their eyes shut, think real hard, and click their heels that the price will be close to $12 a share again. This assumes that investors are idiots and irrational. Almost the entire shares outstanding are owned by institutions. They buy and sell all the time. They make money and lose money, all the time. This makes no sense.
3) A large % of the shareholder base turned over when SVU suspended its dividend in July. Any fund with dividend requirements in their prospectus had to sell. Others institutions followed suit since a suspension is often a death for a stock. Most investments have been speculative since them. Mine is one of them. Have you tallied the shares traded in the last 5 months? Please explain the "still many true longs...with cost of more than $4." how do you quantify many?
4) With a $3.57 share price, what makes you believe that a large number of shares won't be tendered. The price would be higher than $4 if that were true. All of your "true longs" would be buying more shares and bidding up the price.
5) Accepting the tender doesn't mean anything close to what you mentioned. It just means that $4 is a good price on the day of tender. The stock price will fluctuate for the next two qtrs until new mgmt proves they can turn this around. I believe that Cerberus will make huge improvements. But if I sell shares at $4, and buy them back at 3.75 a week later because I believe the price will be higher next year, how does that indicate a lack of confidence.
6) Who is the "MB" crowd? Micro brewers? Money blowers? #$%$ bemoaning? Cerberus originally tried to buy SVU with $900m in equity. For $350m, they now control $35 billion in revenue. The 20-30% was enough for them to be the largest shareholder, control the board, and install new management. Their deal was brilliant.
7) I agree with another post you made. There are people with no real knowledge, of investing, deal terms, turn arounds, rational behavior, and common sense posting here. I found another one.
I am a long with an average cost higher than $4...I've purchased enough shares between $3.45-$3.50 (lately) that when my tendered shares are accepted, I'll have the same number of shares as I did before the deal was announced....and I'll have reduced my cost basis on the shares I have left. Seems pretty simple...
. It is a newly formed investment group "Symphony" and they will buy a maximum of 30% and a minimum of 19.9%
Could it be they never wanted to buy any shares ? Maybe SVU negotiated the purchase to complete the sale.SVU earnings are bad and getting worse. Who'd a thunk it ??