Following up on my previous post, I decided to give odd-lot tenders another try and bought 99 shares of WBMD at $50.70 last Thursday. WebMD Health currently has an odd-lot tender offer expiring September 8 to purchase properly tendered shares at $52. The company had previously made 3 other tender offers at $45.80, $46.80, and $50 since April of this year.

Unlike the previous tender offer I participated in for Fidelity National Services (FIS), WebMD’s price is already set and will not go through a Dutch auction process. However, there is also additional risk involved as a clause included in the tender offer specified that the tender offer may be amended, postponed or cancelled if “a decrease of more than 10% in the market price for the shares, the Dow Jones Industrial Average, the NASDAQ Composite Index or the S&P 500 Composite Index since the date of the Offer” occurs. This appears to be pretty standard verbiage in tender offers; however, since the tender offer was announced on August 10th, these indices have decreased 6-8% so far:

With September 8th being just around the corner, I’ll watch the stock closely and likely submit my decision to tender closer to the expiration date than I did for FIS. It will be interesting to see how this one turns out.

Update: WebMD Health waived the 10% market condition yesterday (August 30) referenced above in their latest update to their tender offer statement. Looks good so far!

Update 9/15/10: Received cash for this transaction, 99 shares @ $52 today. All’s well!

Although I’ve previously written various examples of my investments in going-private transactions, one type of special situations investing that I had not tried until recently was odd-lot tender offers.

In a tender offer, a company usually offers to purchase all or a portion of its outstanding shares at a specified price and time. Sometimes these offers come with an odd-lot preference, which means that shareholders with less than 100 shares will receive preferential treatment and their shares will be purchased first assuming other conditions (such as tender price and submission dates) are met. This allows the company to reduce its overhead and administrative costs for small shareholders.

Fidelity National Services (FIS) had announced back in May that their board had authorized a $2.5B share repurchase plan via a dutch auction, with tender prices expected to range from $29 to $31. In a subsequent amendment a month or so later, preference for odd-lots was announced and the expiration date of the offer was set to expire on Tuesday, August 3rd.

I decided to give this opportunity a try by using my son’s Coverdell account (a small account with preferential tax treatment) to purchase 99 shares at $27.75 on July 15th. At this price, I believed that if anything were to happen and the tender offer fell through, this would still give me sufficient safety to sell the stock with limited losses. It also allowed me to go through the actual motions to figure out how to submit my shares for tender, at what price, with my brokerage firm at Schwab. In this case, it turned out that I needed to phone a representative to handle my request to tender shares (I opted to tender at whatever amount resulted from the dutch auction, but I could have submitted any figure from $29 to $31).

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Clipping coupons used to be something anyone who claimed they were frugal did on a regular basis. I admit I haven’t done this in a while, but I happened to look through our Sunday newspaper last week and was amazed to see how poorly coupons had kept up with inflation (and that’s an understatement).

When I was a kid (in the 80s), I remember clipping coupons pretty regularly. $0.75-1 off a favorite box of cereal, helping my mom find ones that were useful to us. I always kept my eye out for those when it was time to buy new clothes. It was actually a fun thing to do: the hunt as well as trying to see how much money we could save.

Fast forward to 2010, and I was shocked at how little you save on coupons these days. I took pictures of a few from our Sunday paper, and these were quite typical. Instead of $1 off a box of cereal, the deal now is:

Really? $1.50 off two boxes of cereal + a gallon of milk. Around here (Bay Area, admittedly), brand-named cereal is about $5 a box plus $4 for a gallon of milk.

Or how about coupons for toilet paper or paper towels?

Wow — and I just discovered that people sell these coupons on eBay. Huh. Is there actually a market for this stuff?

I’m starting to see why online stores like diapers.com or their new sister store soap.com actually might work and be popular — sell consumer staples with a slight discount, with free shipping after meeting a threshold amount, and deliver quickly. Better than clipping coupons and going to the store, it seems.