What are the intentions of those seeking to buy shares in mini-tender offers?

Question

Consider this mini-tender offer: Notice of Offer to Purchase for Cash Up to 2,000,000 Shares of Common Stock Of Microsoft Corporation at $280.00 Net Per Share by Tutanota LLC

On the surface, this sounds like an excellent deal. The price of Microsoft stock (NASDAQ: MSFT) is currently $248, and this mini-tender offer is paying $280 per share.

On the other hand, the offer sounds fishy because the daily trading volume of MSFT is usually above 25 million shares. Why would anyone purchase at a high price when they could easily purchase at the open market at a lower price?

Reading the notice reveals a few highly disadvantageous terms:

The Offer is not conditioned upon the tender of any minimum number of Shares; however, the Offer is conditioned upon the satisfaction or waiver (where applicable) of a number of conditions set forth in the Offer to Purchase, including, among other things, the closing price of the Shares on the NASDAQ National Market System on the last full trading day prior to the Expiration Date exceeding the Offer Price and Purchaser obtaining all financing necessary to fund Purchaser's financial obligations arising from the Offer.

As of the date of this Offer to Purchase, Purchaser believes that the Shares are undervalued and expects to extend the Offer for successive periods of 45 to 180 days until the market price of the Shares exceeds the Offer Price. Subject to the terms set forth in the Offer to Purchase and applicable law, Purchaser expressly reserves the right, at any time, in its sole discretion, to waive, in whole or in part, any condition of the Offer, or to modify the terms of the Offer.

In effect, this means:

• The purchaser will only buy stock from you at $280 when the price of MSFT is above $280.
• If you sign up for the mini-tender offer, you will be locked in indefinitely while the purchaser extends the expiration date by 45-180 days every time the price of MSFT remains below $280.
• It is possible that the purchaser may not be able to obtain the financing necessary for the deal, resulting in the cancellation of the deal even after your shares have been locked up for a very long time.
• The purchaser has the right to change the deal after you sign up!

This sounds like a terrible deal. My questions are:

• Is there any reason to sign up for this mini-tender offer despite what appears to be a horrible deal?

• What is the intention of the purchaser? Is it mainly for scamming people who did not read the terms?

Answer 1

The SEC has some advice concerning these sorts of mini-tender offers:
https://www.sec.gov/reportspubs/investor-publications/investorpubsminitendhtm.html

This offer may not be outright fraud, but is a bad deal for the seller, since the offer is at a price below a conditional market price (not to mention the several additional conditions).

There are no good reasons to accept this mini-tender offer.

So why doesn't Tutanota, LLC, just buy the shares today? Why the mini-tender? Consider that this mini-tender sets up a situation in which Tutanota can't lose: they get financing to buy shares below market (win), or they deal does not go though (neither win nor lose).

This may or may not be a scam depending on whether there are material omissions or false statements, but in any case it is not a good deal. Keep an eye out for any responses from Microsoft: companies often respond to mini-tenders of this sort with a notice with the SEC advising against accepting. Maybe we'll see one by next week.

A rejection from Microsoft will look a lot like this rejection from Salesforce for a similar mini-tender offer in the same time frame from Tutanota, LLC: Salesforce Recommends Stockholders Reject "Mini-Tender" Offer by Tutanota LLC

Salesforce recommends that stockholders do not tender their shares in response to Tutanota's offer because the offer is at a price below a conditional market price for Salesforce's common stock and subject to numerous additional conditions. Stockholders who have already tendered their shares may withdraw them at any time prior to 5:00 p.m., New York City time, on Friday, April 1, 2022, in accordance with the offering documents.