I recently participated in the TFC voluntary tender offer. The fund purchased 5% of the shares outstanding at the NAV closing price on June 21 minus a 2% repurchase fee. Since TFC has been trading at a discount of 8% to 10%, I had hoped for a low participation in the tender offer which means more of my tendered shares would be accepted.
Many investors, especially those with small positions, do not tender their shares in these offerings because the benefit gained is too small and would be cancelled out by voluntary tender fees charged by brokerage firms. In other cases, it is simply because the investor or their broker/advisor is not even aware of the tender offer.
In this case, about 47% of the shares were tendered, and approximately 10.55% of the tendered shares were accepted. The net repurchase price was $6.34 (after the repurchase fee was applied), and TFC is currently trading around 5.75, so the “alpha” picked up was about $0.60 a share on the tendered shares that were accepted.
For someone with a 1,000 share position, about 105 shares would have been tendered, and the “alpha” pickup would be around $60. Given the time and effort involved, this would only be worthwhile if you were not paying a voluntary tender fee.
For a 10,000 share position, the “alpha” pickup would be around $600 which is not bad. But TFC is not a liquid stock. It takes time to buy or sell 10,000 shares. There is also more risk in holding 10,000 shares during the tender process.
Disclosure: Long TFC