Monday, August 6, 2007

Home Depot tender

Home Depot (HD 36.89) is doing a self-tender for 250 million shares in a dutch auction at prices between $39-44. Why is the stock less than 37? Because Wall street is run by chickens.

Here's the scoop. Home Depot, when they announced the tender, said that a material adverse change was a 10% decline in it's stock price or the market. In other words, that would allow them to cut the price of the tender. HD, on the terms, before the offer on July 9th was 40.23. A 10% haircut brings you $36.21. The stock traded as low as $35.70 today.

So Wall St. wants you to be "worried" about this offer. Maybe I'm supposed to. I'm not. HD's vilified ex CEO Bob Nardelli was hired by Cerebus today to run Chrysler. Do you think Home Depot wants to tick off Wall St. again? That's your answer to the "complicated" tender. Wall St. just wants your money. Take some from them.

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