Tender Offer ADT Shares

I still have to write up my big Webull review (it goes along with my Public, Wealthfront, Robinhood reviews), but suffice to say that during my test of Webull I was granted one share of ADT Inc. stock as part of my “You may receive one share of any stock up to Apple and Microsoft and really awesome stocks that you want to own… <in fine print> or a sucky one valued at at least $4.”

Hey, free is free, right?

So, it was with some confusion that I received a Time Critical – Must Respond letter from Webull Financial LLC in which they gave me no idea whatsoever what was going on, or why it was time critical. Since this is still Web 2.0, or whatever, they did provide a website where I could take one number from the top of the letter–and after some searching–a number from the bottom of the letter to log into what my wonderous offer might be.

A Tender Offer

Tender Offer ADT Shares 1
If you want to read all of the legalese, this is all public information because ADT is a publicly traded company.

The reason they sent me a letter is because I own shares (one share) of ADT stock.

This is technically a tender offer under which I can sell my ADT stock for $9. On Friday it closed at $8.01, so theoretically this is a good deal. In fact, if you had a bunch of ADT shares and were looking for a way out but wanted a $9 share price, then this is your lucky day.

I’m not exactly sure how this would process through Webull. Would it still be free, and so on. I don’t have any idea and I won’t find out because I won’t bother tendering my share.

ADT Investment by State Farm

So, what is going on? Why is ADT offering to buy my shares at $9 per share?

Well, it turns out that ADT made a deal with State Farm where State Farm will invest $1.2 billion in ADT by buying up 15% of State Farm’s shares. There is a lot of legal and financial mumbo-jumbo in here, but suffice it to say that the mechanism for State Farm to buy 15% of ADT shares for $1.2 billion without State Farm issuing a bunch of new stock requires jumping through some hoops.

So, technically, as I understand it:

  • ADT will buy 15% of its shares back 133.3 million shares from current shareholders at a price of $9
  • The company helping ADT pull this all off (Apollo) will ensure that enough shares get tendered (sold for $9)
  • Apollo does this not by having that many shares, but by essentially selling short that number of shares to tender the necessary number.
  • ADT will then issue 133.3 million shares and sell those shares to State Farm for $1.2 billion
  • Apollo will close out any “borrowed” shares it had to complete the offer

The net effect is that State Farm ends up with 15% of ADT stock without diluting current shareholders. (The starting and ending number of shares remains the same.)

What Is The Point of the ADT Tender Offer and State Farm Purchase

The reason for this whole regaramole is that ADT wants money. State Farm will give them the money in exchange for 15% of the company (plus some marketing deals).

Unrelated to all of this is that Google owns some B class shares. No one else owns B class shares. They were created for Google and Google owns them all. Google will also chip in some marketing dollars.

Basically, an insurance company will be able to sell its insurance to people that buy alarm systems from ADT, while ADT offers alarm systems to people that have State Farm Insurance, all with Google Home being linked into this somehow.

Theoretically, taking 15% of the common stock off the market will increase the share price of ADT stock after the deal is completed.

Just another day in the legally required document world of investing.

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