Bridgepoint Education (BPI)

BPI is an odd lot tender idea posted on a couple different locations already. Here's the offer to purchase. The tender is for 19% of BPI's outstanding stock at a price of $19.50. The offer expires December 11, 2013. Odd lots (less than 100 shares) are given priority. A conditions exists such that BPI may cancel the tender in the event the stock or the general market falls 10% or more. Based on today's BPI price, this would be a fall of 15%. With $432mm in the bank and an expected cost of a little over $200mm, financing is not a concern.

With the stock trading around $17.83, the returns look like this before tax and commissions:

	Success	Fail
Cost	17.83	17.83
Proceeds	19.50	15.17
% return	9.4%	-14.9%
% annualized	166%	-83%

The "fail" scenario is based on the price that BPI would need to reach to trigger the possibility of canceling the tender. Although possible, this seems much lower probability given the stock has risen since the announcement, the limited amount of time to expiration, and an earnings announcement that could cause increased volatility is not scheduled to occur. For such small amounts, that's good enough for me.

With such a large repurchase, it also seems worth investigating a longer term purchase of the stock.

Disclosure: Long BPI