https://www.envisionreports.com/3MNEOGENEXCHANGE/2022/3mneog…
Interesting odd lot oppportunity here for low-risk ~$1,000 in profits in the next couple weeks.
Jim
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Hi Jim!
I own MMM, am familiar with the MMM spin-off (an unusual one to be sure), but don’t understand the “odd lot” opportunity you cite…can you give a few details?
By the way, even with the 1.07 for $1.00 exchange (NEOG/MMM, I will not take part in it, since the business of the two companies is very different, plus MMM is part of my core dividend portfolio…and NEOG does not pay a dividend.
Short-term (and given MMM’s troubles of late) NEOG will probably out-perform MMM…but I am in MMM for the longer term, and it fits sector-wise in my portfolio better than NEOG.
Any thoughts?
Cheers!
Murph
BL Home Fool
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Hey, Murph,
This is just a simple arb. You can tender 99 shares of MMM, get a guaranteed fill on the split-off, and get what looks like 7.3515 shares of NEOG for every share of MMM. I shorted the number of shares of NEOG that I should receive in the split-off as well. The actual ratio is still to be determined, but that link shows that it’s been 7.3515 for almost every day of the period. I just need to contact the broker and say that I want to participate. So at that ratio, I’ve locked in a profit of about $1,050. I have no intention of holding either stock apart from this transaction.
Best,
Jim
2 Likes
Jim,
I am bit lost. If the exchange ratio is for 1 MMM share 7.3515 NEOG shares, then why 99 shares? that results in 727 NEOG shares, I guess 96 shares allows you to get close to 700 shares, which is easier to short or buy options.
Are you looking at the maximum number of MMM shares you can tender?
Hi Jim, what happens if the purchase is overprescribed. Are you at risk if only half (or less) of the share are transferred. Especially if the trade moves against you, ie MMM drops and NEOG goes up?
Randy
Ps: to be clear. I am always appreciative of your arbitrage ideas!!
Kingran–
99 is the maximum you can get for the oddlot priority, ensuring that you get to participate maximally in the split-off. Usually anything below 100 shares is considered the oddlot, though I’ve seen 250 shares on one tender offer.
Jim
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Randy–
That’s where the oddlot priority is valuable, ensuring that anyone who tenders fewer than 100 shares will be able to take part. In previous split-offs, you might have less than 50% of your shares accepted.
Jim
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Thanks much, Jim!
Cheers!
Murph
BL Home Fool
I shorted the number of shares of NEOG that I should receive in the split-off as well. <<<
Jim,
I know this is a way to lock in the profit should NEOG priceschange, but could you run through this in slow motion for the uninitiated like me? Thanks,
Vince
Vince–
So if you expect to get 7.3515 shares per MMM share and you have 99 MMM shares, then you can short ~727 shares of NEOG when you open the position. Of course, the exchange ratio might change but it’s pretty much always been 7.3515, as you can see in that table. When you get your 727 shares of NEOG from the split-off that will cancel out the shares that you’re short. And then you’re square.
Jim
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Interesting today, MMM is down by $4 (2.86%) and neog up by $1.49 (7.15%). I have decided to jump into this trade, haven’t really read or looked into the prospectus. Trust in Jim.
Okay, so you’re going to buy 99 shares of MMM and you have checked with your broker that you will have the ability to make the odd-lot election on Monday? Because it is the odd-lot provision that guarantees you the full 7% conversion bump. (Likely followed by the immediate sale of NEOG shares received, if not taking the short position.)
Because if your share don’t settle in time to participate, all is for naught…
Okay, so you’re going to buy 99 shares of MMM and you have checked with your broker that you will have the ability to make the odd-lot election on Monday?<<<
I did go through that step - buy today, shares settle on Monday, can give tender instructions (including the odd-lot election) Monday or Tuesday as the deadline is the 31st at 11:59:59 PM. E*Trade, anyway, is familiar with the program.
Vince
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I’m sitting it out, but I have been aware of this one in a bunch of message boards and I just wanted to make sure that my friends here are aware of just how close to the deadlines it all “is”…
-Another Rob
And the conversion ratio dipped to 6.9997 today. So more volatility and uncertainty.
Jim
And the conversion ratio dipped to 6.9997 today. So more volatility and uncertainty.<<<
The above link does not update - at least mine hasn’t. Is there a way to get the updates or are you 'ciphering by hand?
Vince
https://www.sec.gov/Archives/edgar/data/0000066740/000114036…
They file/publish a new 425 form at the SEC each trading day evening…
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Final exchange ratio is decided and set to 6.7713 shares.
https://investors.3m.com/news/news-details/2022/3M-Sets-Fina…