$HMHC Tender Offer 4/6 deadline, cheap calls, alleged low-risk high-upside play... could there be something here?

tl;dr $HMHC has a tender offer from Veritas capital to buy shares for $21, deadline is April 6. Several institutional investors have written their intention to refuse the tender offer, stating that they believe $21 is undervalued. If the offer is refused OR the offer is revised upwards to a higher value a couple dollars higher that the institutional owners are willing to sell at you’ll see an instant jump in the options chain.




Here’s where I have to come clean and admit the original DD was found on WSB, yeah I know but it is what it is $HMHC could be the next 10 bagger gamble : wallstreetbets

5/20 $22.5 calls are 0.18 and the $25s are $.08 so still reasonably cheap IF it’s true the downside risk is very low. Can Any lawyers or financial experts weigh in on the offering and whether the downside is truly capped?


Volumes are low enough as to be meaningless but FWIW the $25s I picked up for .10 are up 30% (to .13) and the 22.5s are up 15% from .20 to .23.

Volume is so low that liquidity would be a major concern if you decide to dip your toes into this one. But I don’t mind a little gamble unless I find something indicating issues with the $21 floor.


Up 27% on my options position today, and this is after cutting a few contracts at open to partially cover basis. Liquidity still terrible so set low limits and be patient, don’t buy at ask or even the mid

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I don’t know what’s going to happen if the tender offer fails, but at this point it looks highly likely to fail. For one, the filing regarding the extension said that only 0.6% of outstanding shares were tendered, so basically so far nobody has tendered their shares.
And with the stock trading at exactly 21, the merger arbs aren’t going to be buying and tendering since there’s no profit in it. And a few large shareholders have already come out against the tender offer.

Considering that a paltry 0.6% of shares were tendered 2 days before the original deadline and the current market price of the shares, I would be absolutely shocked if the extension moves the needle at all.


This has a previous topic from a few days ago, in which I commented that the DD poster on reddit had bagged himself a 2-4x gain just by getting others to buy in.

Now, several days later, the options seem to have come down a bit. Will probably grab a few tomorrow and see how this plays out.


Taking a small position in this with the challenge. Thank you for the info! :pepepray:


Thanks for this; took the challenge plays and some shares (in the retirement account) - with the shares sitting at $21, seems like a no-brainer.


Did a search on HMHC and found that this was previously called out 9 days ago here by @muhe
Just dropping here for some street cred :slight_smile:


shoutout @muhe clearly I dun search goofed before posting this :sweat_smile:


Picked up 50 5/20 22.5C a week and a half ago, covered my cost basis this morning. Can’t go tits up at this point.


More WSB chatter.

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Why not the April options if the offer is due on April 6?

Is it in case of any sudden last minute changes to the deadline that could extend it beyond April 14? Thus May/June would be best r/r for your buck?

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This comment has an interesting idea of taking Jan 2023 22.5c instead.

If the deal falls through, and the stock price goes up, that’s great.

If the deal falls through, and the stock price goes down, the Jan 2023 still stands to gain from a restoration of time value.

Win/Win situation…?

I think I’d read that they can’t extend the deadline any further.


Found this link for why the $21 offer is undervalued.
Maybe someone will find it useful

Keeping an eye on this play but just wanted to emphasize that there is a huge risk going OTM calls on these buyout plays. If you buy $25 calls and the buyout price is $24 the premium on the May $25 calls will go to 0.01 even though the stock price would go up by 15%. This is because the buyout price creates a ceiling and so any strikes above this ceiling will lose all of their premium because the options will adjust to the fact that HMHC will not trade above $24. If you’re going to play this stick to the $22.5s


If the $21 offer is refused, does anything obligate Veritas to make a higher offer? Couldn’t they just leave the table? Would that be bullish as well?


Even if they can I don’t think another deadline extension is meaningful. If it was like 40%+ tendered a deadline extension might mean something, but if <1% tendered, it’s not like everyone is going to suddenly change their mind in a week.

They won’t be obligated to make a higher offer, but that could still be bullish. The whole reason behind investors not tendering their shares at $21 is because they believe the shares are worth more ($25-28), so upon a rejection and no higher offer the stock will be able to discover its (hopefully higher) true valuation. Whether or not that would happen soon enough for May or June calls to print who knows, which is why some people are advocating for longer dated options. But I’m an ill informed degenerate who already covered their cost basis on the trade so I’m riding with the 5/20 22.5 calls.


Argh the Jan 2023 22.5c are up 55% today. Not gonna get my fill.