Wow, Cerberus and Supervalu are really sticking it too share holders now.
They anounce an extension for another month. The share price suddenly moves to the mythical $4.00 mark.
Now what? You have tendered share at $4.00 but you know that with 42% tendered and a 30% max purchase that at most only about 70% of your shares will be tendered. So now what? Sell on the open market for $4.00 or maybe more and cancel your tender? Why not?
That's what Supervalu hopes for. Why? All shares that are tendered puts money in share holders pockets and reduces the share holders invested in SVU. If they can discourage shares from being tendered, and they will... It could cause new issues that will dilute the outstanding shares. This sucks for share holders but is good for Supervalu. New issues puts the money in Supervalu's pocket and not current investors. Cerberus/Symphony still get equity ownership, but Supervalu raises cash. They don't care about the dilution.
I warned you of this weeks ago and was beginning to think I might possibly be wrong, but then not to my surprise....
Boom! An extension and a surge to $4,00 Dilution is the solution amongst the confusion. I have peeked in every now and then and sadly, there has been very little meaningful conversation on this thread.
OK Now what does the tender look like? A few weeks ago 42% of the outstanding shares were being dumped for a $4 tender. Tendering now is ludicrous. You either sell or have sold on the open market, or you hold and have a stop loss at $4.
Either way, it puts you in a likely position of having to issue new shares to meet the 19.9% stake by Symphony. Double whammy right? New shares and less of a stake. They have a monetary cap in place. They will not end up coming close to the 30% stake they would have if the share price stayed below $4 and the tender was met.
Does anybody STILL believe that dilution is not imminent?
There has been an extension of the tender period. That means shareholders have another month to determine wether or not to tender. Who would tender for $4.00 with no guarantee on the amount shares that would be tendered and tie up your monet when you could of sold on the open market ALL shares for above $4.00?
42% were ready to DUMP shares at $4.00 why wouldn't they sell for more now? Or even still, hold if they think it is going higher? Either way, the tender amount might not hit the required 19.9% and then new shares will have to be issued. That is what I believe will happen. Diultion is coming!
Good for shareholders in the short term. Not good after several shareholders withdraw tender to sell on open market.
Cerberus rigged this for themselves and against the shareholders right from the get go. If the stock rises above $4 and folks tender.... Cerberus/Symphony win. They bought discount shares. If the stock rises above $4 and folks don't tender (likely) then Supervalu has to issue new shares. They are basically giving money to themselves and taking an equity position. Also diluting the outstanding shares.
Either way shareholders lose in the long run. Symphony ownership on tender means no confidence in the stock above $4 by investors. Symphony ownership on new issue means dilution. Pick your poison.