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Exchange offer in ATMU increases shares on loan

Exchange offer in ATMU increases shares on loan

Posted March 4, 2024 at 10:45 am
Matt Chessum
S&P Global Market Intelligence

Cummins Inc (CMI) recently launched an exchange offer for the separation of Atmus Filtration Technologies Inc (ATMU).

On February 14th 2024, Cummins Inc (CMI) announced it would commence an exchange offer to split off its remaining interest in Atmus Filtration Technologies Inc (ATMU). In May 2023, 19.5% of Atmus shares were sold via an initial public offering, with Cummins Inc retaining 80.5% of Atmus’ common stock.

According to the Cummins investor website[1], “the exchange offer is expected to permit Cummins shareholders to exchange all or a portion of their shares of Cummins common stock for shares of Atmus common stock at a 7% discount”.

Since this announcement, borrowing activity has increased significantly in ATMU stock, reaching 23% of outstanding shares. The discount permitted by the exchange offer produces an arbitrage opportunity for investors.

% Shares outstanding on loan - ATMU

S&P Global Market Intelligence Securities Finance data also shows that borrowing fees have spiked as a result of this strong increase in demand. Inventory in ATMU stock is dominated by a small number of lenders. The borrowing fee and the availability of supply is therefore likely to have a growing impact on investors ability to participate in this opportunity.

Originally Posted March 1, 2024 – Exchange offer in ATMU increases shares on loan.

[1] Cummins Launches Exchange Offer for Separation of Atmus Filtration Technologies Inc. :: Cummins Inc. (CMI)

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