Ag Growth (TSX: AFN) sold off heavily today as a result of overall market weakness coupled with the markets not liking the fact that their costs are going to be increasing in the upcoming quarters due to the surge in steel pricing, coupled with a likely re-valuation of their technology platform. It’s not great having your top holding taking a haircut like this, but that’s how markets work – things go up and down, and this is also buffered by other things in my portfolio which take advantage of inflation.
However, what really got my attention was a tender offer from a “Sustainable Agriculture & Wellness Dividend Fund“, which will soon by listed as AGR.UN on the TSX.
They want me to flip my AFN shares in exchange for yet-to-be listed units in their fund, based off of the average trading price on June 1-3, at a par value of $10/unit.
I can only assume it was also offered to other securities they plan on holding in their fund (they list the prospective holdings on a one-pager, including companies such as Beyond Meat, Farmers Edge, Goodfood Market, Rogers Sugar, etc.).
I have stronger wording which I will not type in, but will state that this offer is highly unattractive for a few reasons. I’ll list a couple.
One is that right away, such an offering will involve a 4.5% payment to the agents, so effectively your $10 ‘value’ will be reduced to $9.55 immediately, plus another $500k in expenses associated with the offering (it costs legal fees to process partial tender requests such as these).
Assuming you were silly enough to go with it, the MER of the fund in question is 125bps.
I just shut off the prospectus from my computer screen before I wasted more mental space on it. But it was worthy of a post – who actually falls for these types of offers?