I recently sold my shares in Abbott Laboratories (ABT).
I had a little more than 53 shares, and I got a letter about an odd lot tender offer. This is when a company tries to get shareholders with less than 100 shares to buy more to get up to that price.
I guess it is better for them, since small shareholders can require more bookkeeping. But I don’t think it’s always good for the small shareholder.
For one thing, if I read the letter correctly, I would have to pay $52 a share, plus a processing fee of $2.50 a share. That comes out to $54.50 a share. Right now it’s at $47.47, with an all-time high of $47.59.
I got a tender offer from Verizon when I had 14 shares. I bought more on the open market to get up to 100. They also offered to sell to me above the market price.
Abbott has a P/E right now of 31.88. I know PE ratio is not everything, but that is pretty high. I don’t mind re-investing dividends in stocks with a PE ratio that high, but I would not buy more shares or shares in a new company with a PE ratio that high. I think 20 is as high as I would go. If ABT’s PE ratio goes below 20, and they are still paying increasing dividends with a good payout ratio, then I would buy more someday.
I was hoping to get more of my stocks up to 100 shares, but if some company with a high PE ratio forces my hand, I will sell. I will have to get that $12 every three months from somewhere else. I did buy more JNJ. Even after selling ABT, I am still going to come out ahead. I might just buy more JNJ to get that to 100.
Image from Abbott Laboratories website, assumed allowed under Fair Use.
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Thanks for sharing your recent sale of ABT. I plan to keep my ABT for a long, long time. While I also own an odd lot of shares I would not agree to buy more at such an outrageous price that they offered you either. I’m still not clear as to why you would be forced to buy additional shares. Couldn’t you just leave your position as is?
I got the same letter last week. Abbott does say that you can do nothing, if that is your choice. I am thinking the same, that it is a good stock to keep long term. I bet you are correct in assuming that the bookkeeping for us small shareholders is the issue. Thank you for posting—-I had done an internet search to find an answer!