HMHC - Do NOT Tender your shares and buy OTM calls (from reddit post)

Found a Reddit post that seemed like a really interesting play and would like somebody else’s thoughts about it as well

"Here’s the greatest play you’re going to find this morning. HMHC management has made a shady deal and agreed to be acquired by Veritas for $21 a share via a tender offer.

This is where it gets interesting. The shareholders must decide if they will tender their shares or not on April 1st. They require 66%~ to tender for the merger to complete. Only 34% must not tender and they will not be acquired for $21.

Now here’s where it gets juicy and 100 bagger opportunity arises. Several of their larger institutional share holders have wrote letters saying they will not be tendering their shares as this is undervaluing the company. Several large shareholders believe the fair acquisition price is $28+… (see sources below)

Assuming only 1/3 shares aren’t tendered then that will force Veritas to either increase their cash offer to get a deal done or back out. However, either should boost the share price as this proves to the market $21 is undervalued.

To make a great play I will be buying shares and will not tender. But if 66% are tendered then I make my $.10 a share in a month and go about my day. BUT the HUGEEEE upside is in the OTM call options. I am buying May calls with a strike at $22.50. These can be picked up for $.05-$.10… IF shares aren’t tendered and Veritas ups the offer to $24+ then you’re looking at massive returns. Retirement type returns within a month so strap in.

TLDR; buy shares and don’t tender and buy Short term OTM calls in hopes the offer gets bumped to get the deal done for massive returns."


One thing I noticed is the May calls the OP on Reddit mentioned have very low volume - from the perspective of the options - I think there could be a share play here but it is heavily dependant on others and items out of your control. If you don’t mind holding the shares for a while if it doesn’t work out might not be a bad gamble - looks like the average price before the news was around 18/19 a share which I would factor is things go terribly wrong.

The 20’s have zero OI and a massive spread -

The 22.50’s mentioned have about 2700 OI

1 Like

Those 22.5c have 4k volume on the day, and are up to .15-.20, meanwhile the stock is basically flat on the day. Once again a reddit DD on an unknown low volume ticker has netted the OP a 2-4 bagger just by getting more people to buy in and drive the options up.