Once in a while, I take part in sure inventory change affords which embody a particular provision for smaller buyers, referred to as “odd lot tenders”. You will discover extra background info on these short-term “arbitrage” performs within the final two affords that I joined: Cummins/Atmus Filtration and Johnson & Johnson/Kenvue.
Just lately, Lennar (primarily a homebuilder) introduced such an change supply as they attempt to full their spinoff of Millrose Properties (an REIT, primarily a land financial institution). This time, Wealthy Howe of StockSpinoffInvesting.com – who has much more expertise with these offers than me – has generously agreed to share his abstract and evaluation of the deal. Please take pleasure in the next visitor publish:
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Purchase Lennar – Trade Supply – Particular Scenario
October 15, 2025
LEN: $122.21
Market Cap: $30BN
Advice: Purchase 99 shares of LEN, Trade for shares of MRP
Anticipated Revenue: $772 / 6.4%
Abstract
Lennar (LEN) introduced an change supply on October 10, 2025 whereby buyers can change their LEN shares for shares of Millrose Properties (MRP), Lennar’s land financial institution spin-off. To incentivize the change, LEN buyers will obtain $106.43 of worth in MRP shares for each $100 of worth in LEN shares. I count on the change supply to be oversubscribed. Nonetheless, there’s an odd lot provision such that any LEN shareholders with 99 shares or much less (odd lot provision) won’t be prorated. Thus, there is a chance to purchase 99 shares of LEN and change them for shares of MRP. This could lead to a revenue of ~6.4% / ~$757 (at present costs) in lower than a month. The revenue shouldn’t be assured (in fact!) however is low danger, for my part. To take part on this change supply, you should contact your dealer (you might be able to take part within the change supply on-line). It won’t occur routinely.
Deadline: The change supply will expire on November 7, 2025. So that is time delicate. Brokers sometimes require buyers to present them discover concerning the change properly earlier than the official deadline. Schwab’s deadline will doubtless be November 5, 2025, however it will be prudent to purchase on November 3, 2025 on the newest because it takes two days for shares to settle. I’m planning to purchase 99 shares of LEN shares on or earlier than November third after which instantly name Schwab and ask to take part within the change supply. Different brokers (Constancy, Interactive Brokers, and so forth.) have their very own inside deadlines that are sometimes after the Schwab deadline.
Extra Particulars
Lennar (LEN) spun-off ~80% of Millrose Properties (MRP), its land financial institution, in February 2025.
It retained ~20% of the enterprise.
On October 10, 2025, Lennar formally introduced that it will spin off its remaining ~20% stake in Millrose Properties through an change supply.
I’ve highlighted key phrases however you’ll find extra detailed info right here.
For each $100 shares of LEN that you just personal, you’ll obtain $106.38 of MRP shares.
Right here’s a hyperlink to the transaction’s dwell web site with further particulars.
Since this change represents a horny return in a brief time frame, I count on the providing to be oversubscribed (just like earlier change affords that I’ve coated).
Nonetheless, there’s an odd lot provision such that if you happen to personal fewer than 100 shares, you’ll not prorated.
Right here is the change supply submitting and a web site which tracks the change supply indicative change ratio.
This providing is similar to the numerous different break up off/change affords that we’ve participated in.
Examples:
How you can Execute the Commerce
LEN is at present buying and selling at $122.21 per share.
MRP is at present buying and selling at $31.96.
Right here’s how the maths works at present value ranges.
Step 1
Purchase 99 shares of LEN for $122.21 per share. Whole value of $12,099.
Step 2
Per the change supply, shareholders who elect to change their LEN shares will obtain MRP shares at a 6% low cost or at a value of $30.04 ($31.96 x (1-6%)). The MRP value hasn’t been finalized but. However I’m utilizing the present value plus the low cost as I believe that’s one of the simplest ways to approximate what the precise value will likely be. The precise value will likely be decided by a system laid out right here.
$12,099 / $30.04 = 402.72 shares of MRP
402.72 shares of LEN / 99 shares of MRP = 4.07. 4.07 is decrease than the max change ratio of 4.1367. If the ratio had been larger than 4.1367, the variety of MRP shares could be maxed out at 409 (4.1367 * 99).
Step 3
Promote MRP shares which can be obtained as soon as the change goes by way of. It normally takes Schwab a couple of week to course of the change supply. I count on to obtain my MRP shares by November 14, 2025 or shortly thereafter.
At present costs, the commerce is anticipated to generate a revenue of $772.
By way of timing, the change supply expires on November 7, 2025 (until LEN modifications it), and so I like to recommend that you just purchase LEN shares no later than November third to make sure you make the deadline (it takes two buying and selling days in your buy to settle and brokers inside deadlines are normally 2 days previous to the official firm deadline). After you buy shares, name your dealer and ask them to tender your shares. That is essential. Your participation within the change isn’t computerized.
I created a spreadsheet to trace the profitability of this commerce. Here’s a screenshot of it:
You possibly can entry the spreadsheet right here: LEN / MRP Trade Supply Spreadsheet
(to edit, make a duplicate of the spreadsheet and plug in your personal assumptions)
Ideas on Millrose Properties?
Millrose was created when Lennar contributed ~$5.5 billion in undeveloped, partially developed, and a few absolutely developed land property, together with as much as $1 billion in money, to Millrose. Millrose operates as an unbiased entity, buying and growing land to ship completed homesites underneath land possibility contracts. On the time of the spin-off, it solely served Lennar but it surely plans to have interaction with different homebuilders as properly.
Lennar pays Millrose possibility charges for the suitable to purchase land on Millrose’s stability sheet.
This strategic transfer is a part of Lennar’s ongoing shift towards an asset-light working mannequin, aiming to cut back monetary danger and improve returns by minimizing direct land possession.
I’m blissful to personal Millrose Properties at a 6% low cost, however don’t need to personal the inventory for the long run as I consider its capacity to develop and generate upside is proscribed given Lennar’s proper to buy its land.
What are the dangers?
LEN Sells Off
If you happen to purchase LEN, and it sells off previous to the change, you can lose cash. I’m not significantly frightened about this danger, as buyers will doubtless proceed to bid LEN shares as much as reap the benefits of the share change.
A significant dump might occur if some random destructive information hits LEN (for example destructive information in a lawsuit). That is unlikely however did occur throughout the MMM/NEOG change supply. JNJ additionally had a destructive courtroom ruling throughout its change supply, however the change was nonetheless worthwhile.
If LEN does dump, it must dump by ~6.4% so that you can lose cash. To reduce danger, you can additionally quick out the MRP publicity.
I appeared again on the efficiency of the mother or father throughout comparable transactions and located that it normally performs properly (common: +2.2%; median: +3.8%)
The Trade Is Canceled or the Odd Lot Provision is Eliminated
Lennar needs to distribute its ~20% stake in Millrose Properties and that is an environment friendly manner to take action. I don’t count on it to be canceled, but it surely’s attainable.
The odd lot provision could possibly be eliminated, nevertheless, this has by no means occurred for break up off transactions (that I’m conscious of). Nonetheless, it might occur!
Millrose Properties (MRP) Inventory is Weak After the Share Trade Closes
If the share change closes and buyers who’ve exchanged their LEN shares for MRP shares make 6.4%, however then MRP shares instantly depreciate by greater than 6.4%, this commerce will lose cash. In different phrases, this commerce can lose cash though the preliminary math seems to be favorable.
Whereas this danger is legitimate, I’m snug taking part on this commerce and consider it represents a horny danger/reward.
Disclosure
Wealthy Howe, proprietor of Inventory Spin-off Investing (“SSOI”), doesn’t personal LEN shares however plans to purchase them. All expressions of opinion are topic to alter with out discover. This text is offered for informational functions. We don’t warrant the completeness or accuracy of this content material. Please do your personal due diligence and seek the advice of with an funding adviser earlier than shopping for or promoting any inventory talked about on www.stockspinoffinvesting.com.