Offer on Tesla shares, what is best to do about it, help please

happyhero

Hi I have Tesla shares and I have happily left them alone for a while as they were doing ok but now I have received the message below from the the investment broker where I have these shares and I am not at all sure what I should do. Can anybody tell me what they think I should do. It mentions something about catching investors off guard which immediately makes me think about avoiding the offer and it sounds like there are some negatives to taking up the offer and holding shares with Ponos, someone guide me please what I should do or what you would do in this situation. I don't want anything complicated, I liked just simply holding Tesla shares but at the same time I'm in it for the money so if there is a big chance of making some money with little hassle I possibly don't want to miss out.

Any help/advice appreciated.

Your Tesla Inc shares

 

As you hold Tesla shares, we’re obliged to let you know that Ponos Industries LLC has announced its intention to buy up to 500,000 shares of Tesla Inc, by way of a mini-tender. This is when a person or company tries to buy less than 5% of another company at a fixed price.

 

But we want to alert you to a warning from the U.S Securities & Exchange Commission (SEC).

 

Mini-tenders such as this have been increasingly used to catch investors off guard.

 

“Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers. But they later learn that they cannot withdraw from the offer and may end up selling their securities at below-market prices.”

 

You can read the full SEC warning at www.sec.gov/investor/pubs/minitend.htm.

 

If you take part in the tender offer, the price you would agree to sell your shares to Ponos Industries is USD420.00 per share.  

 

But Ponos will only go ahead if the Tesla share price is above USD420.00 when it completes. And they can keep the offer running indefinitely and you can’t cancel your instruction. So, if you take part in the offer Ponos could hold your instruction indefinitely.

 

The key points we want to raise are:

 

• You could sell your shares at a lower price than you could get on the market at the time
• You can’t change your mind
• You won’t know when your Tesla shares will be tendered. Or when you’ll get your money back
• The proceeds are likely to be treated as US Income and subject to US withholding tax
• Ponos Technologies are not linked to Tesla Inc.

 

This information is based on our understanding of the offer. It isn't a recommendation to take any particular course of action. Read on to find out your options

 

Your two options

 

Option 1 – Take no action.

 

You don’t have to tender your Tesla shares.

 

If you don’t want to take part, there’s nothing for you to do. Your shares will remain on your HL account.

 

Option 2 – Tender some or all your Tesla shares. If you want to take part in the tender offer please reply to this secure message stating the number of shares you wish to tender and that you have read and understand all of the risk factors involved. The deadline to tender is noon on Monday 12 October 2020.

 

We can only accept your tender if you confirm in the message that you’ve read and understood the above conditions. As the offer is for a limited number of Tesla shares, you may not be able to sell all, or any, of those you ask to.

 

If your shares are tendered, we'll convert the proceeds into sterling using the exchange rate at the time if receipt and our standard currency conversion fees.

 

Please note our helpdesk can't provide advice about which option you should choose.

princeofpounds

LOL.

You could sell your shares today at ~426. Ponos is a company offering to buy shares at 420, only IF the price is OVER 420 at the time they buy them, AND if you accept they can delay for as long as they like until that condition is met.

This is a bit like offering to buy the £10 note in your pocket for £9.90. OK, not a perfect analogy, but you get the idea.

Do not tender. If you want to sell your shares, do so on the open market now for more money. I have no idea what Tesla is worth, but this is a terrible deal. It's not just the price, it's the lack of control over timing; you can be trapped indefinitely, whilst Ponos gets a free option over your holding.

Kind of surprising this is legal actually, although in one sense I suppose making an offer should never be illegal even if it's below market. But they are clearly hoping people don't really understand what they are offering. It's good that your broker is explaining this to you, as much as they can.

AnotherJoe

That looks word for word like the HL message i got.

No idea if its a scam but it makes no sense to me and might as well be.

princeofpounds

The only reason a below-market offer would be useful is if you were trying to sell a huge block of Tesla shares which could only be done at a discount to market given the overhang involved. But even an institution in that situation wouldn't agree to a deal like this, as there is no certainty of completion.

george4064

Seems legit. I tend to agree with other posters that for 99% of shareholders just ignore this whether you want to hold or sell.

However, I can see this offer might be useful for big shareholders who wish to offload their shares without moving the price. For example sell large orders may trade lower than the bid price so to have a firm offer such as this mini tender provides certainty if you want to offload your large holding. Appreciate this probably won’t apply to any MSE Tesla shareholders.

bowlhead99

There was one of those last month for Netflix, which was also from Ponus Industries; the offer price was 10% or so higher than the share price, but the offer contained language that, "as of the date of this Offer to Purchase, Purchaser believes that the Shares are undervalued and expects to extend the Offer for successive periods of 45 to 180 days until the market price of the Shares exceeds the Offer Price". 

Effectively the purchaser is looking to get a legally binding commitment from existing holders to sell to them at an agreed price which they'll pay at the end of the offer period, but they'll just keep extending the offer period as many times as they like until the market price is higher than their offer price (so that they'll definitely be 'in the money' when it goes through) and the price they're agreeing with you will not include any interest for however many weeks or months or years you have been waiting with your shares pledged to be sold to them, and if they are late in paying you for whatever reason they won't pay you any interest for that either, even if in the meantime they have sold short the shares and made a killing when they eventually pay you off and fulfil their side of the bargain.

These sort of offers can just be filed in the bin.

Thrugelmir

Must be a real challenge for funds that track an index to buy adequate stock without causing disruption to the market price due to limited liquidity. 
Entering the S&P 500 (eventually) will spend the price spiraling.
 

Username999

It's legit and Ponos Industries do these tenders quite often, Boeing, Visa blah, blah.
Don't know why they do it this way, they could use Traded Options to get the shares at the price they want.
Are they buying for themselves or a client, maybe Jeff or Bill

Option 1 – Take no action.

Thrugelmir

Username999 said:

It's legit and Ponos Industries do these tenders quite often, Boeing, Visa blah, blah.
Don't know why they do it this way, they could use Traded Options to get the shares at the price they want.
Are they buying for themselves or a client, maybe Jeff or Bill

Option 1 – Take no action.

US companies use share buy backs to enhance EPS. Has been a feature of the US market for the past decade. Disguises poor underlying trading performance. While rewarding executives via share remuneration schemes.