Apollo Commercial after the $4.10: how a liquidation stub is priced before the exit closes

On Thursday 29 October Apollo Commercial Real Estate Finance paid its first liquidating distribution, $4.10 a share. On Friday the shares opened without it and closed at $2.33. The author owns 300 of them. What is left is a stub: a claim on whatever the company pays out after it sells the rest of its book, priced by the market for exactly five more sessions. On Friday 6 November the shares stop trading, and what remains becomes an interest that cannot be sold. This issue works through what the $2.33 says.

The lesson

How the market prices a liquidation stub

A company that votes to liquidate usually pays its holders in pieces. The first piece comes quickly, from cash and the assets easiest to sell. The rest arrives over months or years, as the remaining assets are sold and the liabilities are settled, and only an estimate of it exists when the shares start trading without the first payment. Those shares are the stub. Their price is the market’s view of the remaining payments, discounted for how long they take, how far they may fall short of the estimate, and what it costs to wait.

Apollo Commercial is a clean case because every number is in its own filings. Its definitive proxy statement estimated total liquidating distributions of $7.75 to $8.50 a share, assuming the plan was completed in the first half of 2028. Holders approved the plan on 29 September. The 9 October release declared $4.10 as the first payment, paid 29 October. The 16 October update set the last day on the New York Stock Exchange at 6 November and said the assets would then pass to a liquidating trust.

Start with what the estimate leaves after the first payment. $7.75 less $4.10 is $3.65; $8.50 less $4.10 is $4.40. Thursday’s close of $6.45, the last with the $4.10 attached, less $4.10 is $2.35, and Friday’s open was $2.32: the market took off the payment and very little else. Friday’s close was $2.33, on 8.6 million shares.

A gap that wide is the market saying several things at once, and each of them is written in the filings.

Time. The proxy’s range assumes completion in the first half of 2028. If all of the $3.65 arrived on 30 June 2028, buying at $2.33 would earn +56.7% over 609 days, about 34% a year simple, or about 31% a year compounded. That is the low end of the estimate on the latest date the proxy names, so the proxy’s own timing does not explain the price on its own.

The estimate. The remaining payments are estimates “subject to payment of the Company’s liabilities and obligations and the creation of associated reserves”, in the words of the 16 October update. The trust’s board sets the amount and timing at its discretion. Nothing in the filings caps how long it may take.

The exit. This is the part specific to a stub. Until 6 November a holder can sell. After it, the interest can be transferred only by will, inheritance or operation of law. Anyone who cannot hold an unlisted, untradable interest, such as an index fund, a fund with daily dealing, or an account whose broker will not carry it, has five sessions to sell, and whoever buys from them is paid for taking the asset nobody else can hold. The price falls toward what the most constrained seller will accept, not toward the value of the estimate.

Tax. The proxy warns that a holder outside the United States may earn income through the trust that is effectively connected with a US business and may have to file a US return. That is a cost the estimate does not include and that varies by holder.

The author’s own position puts numbers on the choice. 300 shares cost $6.915 each with commissions, $2,074.50. The $4.10 paid $1,230.00. Sold at Friday’s close, the other $699.00 would close the trade at −$145.50. Held into the trust, and if the estimate is paid in full, the remaining $3.65 to $4.40 brings in $1,095.00 to $1,320.00, for a result of +$250.50 to +$475.50 (+12.1% to +22.9%) on the original cost, paid at an unknown date. The author holds, and under the house rule does not trade the shares on the first two New York trading days after this issue is sent.

This goes wrong in three ways. The first is reading the stub price as the market’s estimate of what is left: it is that estimate after the cost of holding something that cannot be sold. The second is reading the proxy range as a promise: it is an estimate with a stated assumption about timing, and the trust’s board decides the rest. The third is forgetting the date the exit closes: after the last trading day, the only way out is the trust’s own payments.

Earlier lessons have their own guides: odd-lot priority (issue #1), the Canadian paid-up-capital test (issue #2), broker cutoffs and record dates (issue #3), the upper limit in a split-off exchange offer (issue #4), US withholding on a self-tender (issue #5), due bills on a large distribution (issue #6), proration (issue #7) and offers priced in a foreign currency (issue #8).

This week’s situations

Live offers with terms and a deadline, each worked through with the same arithmetic. This week’s filings produced 50 captures: 25 were tenders by funds with no listed share, 14 by unlisted credit vehicles and funds with no line at the author’s broker, 8 were results, amendments or updates of offers already known, and 3 were new offers. One of the three, Ultralife, is added below; the other two are under Killed. Kip McGrath drops out: its offer closed on 27 October.

Gross = (offer − price) ÷ price, on the part of the position the offer takes up. Annualised = gross ÷ days to expected cash × 365, for that trade only; not a yearly or portfolio return.

Broker execution

A cash merger posted in one business day; a liquidating payment coded as a dividend

This is the running record of what a broker actually does, as opposed to what the documents say. Perfect Corp’s merger took effect at 08:00 New York on Friday 23 October, at $2.00 in cash per share. The $2,400.00 for the author’s 1,200 shares was in the cash balance when it was next checked, at 20:07 New York on Sunday 25 October: within one business day, against six for Arbutus and twelve for Oma Savings Bank, both of which were tenders rather than mergers.

Apollo Commercial’s $4.10 was paid on Thursday 29 October. The broker’s corporate-action screen had coded it as a cash dividend. The author’s US dollar balance rose by about the gross amount, $1,230.00, and no separate withholding line was visible by Friday; whether any tax was withheld will be confirmed from the statement, because the figure is inferred from the balance. On Sunday 1 November the broker’s position screen marked the 300 shares at $0.00, against Friday’s close of $2.33: a mark on a position list is not a price.

Cementos Pacasmayo’s broker cutoff is still not posted, nineteen days before expiry. Four cutoff gaps are measured so far: Arbutus four hours early, Oma Savings Bank about two days early (twice) and Delivery Hero more than two days early. One house rule applies to every holding named here: the author does not trade a security named in an issue from the time it is written until two trading days after it is sent. This week that window covers the Delivery Hero broker cutoff.

The dates that matter · New York time

Killed, and what to look for next time

Read which security the offer is for

BTCS. A modified Dutch auction for up to $500,000 at $0.04 to $1.00, expiring 17:00 New York on Tuesday 15 December. The company’s common stock trades on Nasdaq, but the offer is for its Series V preferred shares, and the filing says “there is no established public trading market for the Series V Shares”. A holder outside the United States also faces “U.S. withholding tax of 30% of the gross proceeds”. A ticker in the filing heading is not the security being bought: read the first page for the class. Author holds: no.

Pacira BioSciences. Viatris’s offer pays $36.50 cash a share for any and all shares, expiring one minute after 23:59 New York on Monday 16 November. The shares closed at $36.39 on Friday: +0.30%, $10.89 on 99 shares before commissions. An offer this close to its price leaves the spread to cover only the broker minimum and the chance of a delay. Author holds: no.

WildBrain. The modified Dutch auction at C$1.30 to C$1.45 expires at 17:00 New York (17:00 Toronto) on Tuesday 3 November. An exemptive order announced on 29 October lets the company extend the bid without first taking up shares already deposited and, in its words, “does not change any of the terms of the Offer”. Friday’s close was C$1.29, below the floor, and the paid-up-capital figure that decides the tax for a holder outside Canada has still not been read. Author holds: no.

Kip McGrath. Crimson’s offer, extended after it passed 50%, closed on 27 October. Which price a holder who bought after the dividend record date received, A$0.75 or A$0.69, has not yet been read in a published document; it will be printed here when it is. Author holds: no.

Also in the count. Thirty-nine tenders were by funds or credit vehicles with no line at the broker. The rest were results, amendments or updates of offers already known: Utah Medical, SkyAI (three), INVE Technologies, Cadeler, Tiny and WildBrain.

The book

Every position, and every closed one

Open, at Friday’s closes. Apollo Commercial, 300 shares at an average cost of $6.9150, $2.33 on Friday after the $4.10 payment of 29 October. Delivery Hero, 50 at €37.035, €37.31 on Friday, not accepted. Cementos Pacasmayo, 99 ADSs at an average cost of $12.6601, $12.76 on Friday, not yet tendered. SDCL Efficiency Income Trust (London), 2,150 at an average cost of 35.31p, 31.86p on Friday; no offer price. And 100 contingent value rights from the Atai transaction, on a placeholder line with no market.

Closed since the last issue: none. Closed earlier, and on the record: Lindsell Train Investment Trust, +£22.67; Oma Savings Bank, +€39.00; Perfect Corp, +US$229.50 (computed; paid out at $2.00 on 23 October). Realised losses on the record: Air Canada, −C$24.95; Zevia, −US$323.10; Arbutus, −US$4.96.

The outcome record, every closed position with fills and realised P&L: https://99shares.org/scoreboard/

This publication discusses the mechanics, deadlines and public filings of corporate actions such as tender offers, exchange offers and liquidations. The author does not hold a licence as a financial adviser in any jurisdiction and is not an appointed representative of one. Nothing here is a recommendation to buy, sell or hold any security, and nothing is tailored to any reader’s circumstances. We do not answer individual investment questions. We accept no payment, sponsorship or other benefit from any issuer named. Any position in a named issuer is disclosed in the issue. The author does not trade a security named in an issue from the time the issue is written until two trading days after it is sent. Figures are taken from the primary source cited. Readers should not rely on this publication in making an investment decision.

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