MEDCO tender offer price is P0.04/share

As covered in yesterday’s writeup [MB link], MEDCO Holdings [MED 0.17 ?50.0%; 2067% avgVol] has undergone a change of leadership (its parent company was acquired by Winter Dragon Limited (WDL)), and this change has triggered a mandatory tender offer for the remainder of the public float. MED updated the exchange yesterday to say that WDL intends to conduct its tender offer of the public float at P0.04/share [link].

MB BOTTOM-LINE: This is not the Tender Offer Report that WDL must file to kick off the official tender process, just an expression of WDL’s intentions with respect to how it will proceed. All that said, the price listed is pretty funny. It’s 20% below the par value of the shares (par for MED common is ?0.05/share), and more importantly, it’s 75% below the current market price of MED shares, which (after a 50% ceiling pump yesterday) is ?0.165/share. Even if you eliminated the speculative tender offer interest, the tender offer price is still 64% below MED’s pre-ceiling price of ?0.11/share. MED’s not the most liquid stock, but it’s not like it’s been suspended for two decades. The closest that MED’s market price has come to the tender offer price was back in September when it briefly touched ?0.08/share during a low point that lasted approximately four months. The stock actively traded considerably higher than that on either end of that period. It’s going to be interesting to see how WDL defends its price. It will need to get a fairness opinion, but it’s not clear yet if the price suggested is the result of that process or if it’s just the placeholder that WDL is using, only to be replaced by whatever comes out of the official fairness opinion. It’s fair to say that, so far, the tender offer price doesn’t seem to have any relation to MED’s market price, which is something of a non-starter.

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