In short: The week's featured, executable special situation — and an existing winner. "Arbutus is a special situation, something we've done before. It's basically an odd-lot tender… ABUS, which we're long from very low levels, like $2 a share, even less, before they won the lawsuit from Moderna." The company now "has loads of cash on the balance sheet," and has launched a modified Dutch auction self-tender to buy back up to $230 million of common stock at a clearing price between $5.00 and $5.75, "funded in part by 178 million in net proceeds from the recent Moderna patent settlement." The mechanism is the trade: "the trade leverages this odd-lot priority provision. So shareholders owning 99 shares in every brokerage — so if you have 10 brokers, you can own 99 shares in each — who tender their entire position are exempt from proration." Worked example: at a $5.50 clear against a $5.07-5.09 entry, "you make 43 cents per share… across, if you have 10 accounts, 990 shares" (the deck prices it off the August 25 close of $5.20: −1.8% at the $5.00 floor, +12.9% at the $5.75 cap). Timeline: "the offer expires on September 29th at 5:00 p.m. Eastern, so you actually have a full month to do the trade," settling October 2nd. Risk, stated plainly: "the final clearing price is unfixed, leaving exposure to a clearing price below the entry purchase cost if the auction clears at the lower bound of five. But at least you know what your downside is." Sourcing note: "we found this from our new special sits screener."
Arbutus is a small biotech that won a patent lawsuit against Moderna over the technology used to deliver mRNA vaccines into cells. The settlement handed it $178 million in cash. Singh has owned the shares since before that verdict, "from very low levels, like $2 a share, even less" — they now trade around $5.20.
What makes this week's news a trade rather than just good fortune is what the company is doing with the money: buying back up to $230 million of its own stock through a "modified Dutch auction." That means shareholders offer to sell at any price they choose between $5.00 and $5.75, and the company then picks the single lowest price at which it can buy the full amount — everyone who offered at or below that level gets paid that same price.
Buybacks like this are usually oversubscribed, so if you offer 10,000 shares you might only get a fraction bought. That is called proration. But almost every tender offer contains a rule that exempts very small holders — anyone owning 99 shares or fewer who offers their entire holding gets bought first, in full, no proration. That rule exists to spare small investors the cost of being left with an awkward stub.
The trade is to become that small holder deliberately. Buy 99 shares — about $515 — and tender them all. If the auction settles at the midpoint, you make roughly 43 cents a share; the deck prices the full range as a 1.8% loss if it clears at the $5.00 floor and a 12.9% gain if it clears at $5.75, over about a month. And because the exemption applies per account, "if you have 10 brokers, you can own 99 shares in each" — the same trade repeated ten times over. The offer expires 29 September at 5pm Eastern and pays on 2 October. The only real risk is that the auction clears at the bottom of the range, below what you paid — a known, bounded loss.
Worth noting where the idea came from: not from a bank or a newsletter, but from the special-situations screener SSR is building and plans to release to subscribers.
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