Mini-Tender Offers: Awful Deals in Disguise?

From time-to-time my broker sends me correspondence regarding various types of "unsolicited tender offers" and "non-mandatory reorg tender offers". These are also known as mini-tender offers. You can read more about them in the SEC's site. They're basically offers by some company or private party to buy less than 5% of the outstanding shares of a public company directly from shareholders.

Okay, so what's the deal?

These "offers" are typically below market-value offers. They can be legal scams in disguise. Basically, weak retail investors will hear the term "tender offer" and will jump the gun in excitement and agree to surrender their shares for less than they could get in the open market!

In the last few months I got one such offer for shares of Bank of America (BAC). And more recently, one for Pepsi (PEP). When I first read the one for Pepsi, I almost thought it had something to do with Pepsi's acquisition of one of its bottlers, Pepsi Bottling Group (PBG) or PepsiAmericas (PAS). Then when I stopped for 3 seconds to think about it, I realized it couldn't be: I don't own shares of either PBG nor PAS. This must be someone trying to buy PEP (the syrup maker) from me. Why?

Another 3 seconds revealed the truth: some funny people at a company called TRC Capital Corporation are offering to take my shares for a discount to market! How awesome is that?

Why would anyone fall for this, you ask?

I don't know. They're probably the same type of eager people who fall for "a one-time business opportunity with the president of Nigeria".

This is what Pepsi had to say about the offer:
PepsiCo does not endorse TRC's unsolicited mini-tender offer and recommends that shareholders not tender their shares in response to this mini-tender offer.
In other words: what a steal! You can read Pepsi's note in full here.

Don't pull the trigger without a bit of investigation. Most offers are not what they seem to be.

Read more about the man behind TRC.

Disclosure: I own shares of PEP, BAC at the time of writing.

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