Offer is back, new deadline is June 28th. Robinhood has brought back their 1% ACAT Transfer bonus of a flat 1% of the transferred amount with no cap. That means a transfer of $10,000 in asset value from an external brokerage account will earn a $100 bonus, a $100,000 transfer will earn a $1,000 bonus, and a $1,000,000 transfer will earn a $10,000 bonus. The bonus should arrive about 2 weeks after the completed transfer, but note that you must keep the assets there for 2 years otherwise they will claw it back. Here is the full PDF fine print. Here is the online FAQ.

For eligible Robinhood customers who complete an ACATS transfer within the Offer Period, Robinhood will deposit 1% of the net transferred asset value to the customer’s Brokerage Account, subject to a two-year earn-out as discussed below. “Net transferred asset value” is the total value of the initiated ACATS minus the value of any outflows from April 30, 2024 at 12:00:00 AM ET until the ACATS is settled, excluding outflows that led to a chargeback. The Bonus will be provided within approximately two weeks from when the customer’s eligible ACATS transfers are completed. The Offer Period begins April 30, 2024 and ends June 28, 2024; however, Robinhood may change these dates at any time without notice. Transferred assets are eligible if they are initiated during the Offer Period.

As with all similar ACAT transfer offers, you can transfer over your existing stock holdings and the cost basis should also transfer over with no tax consequences. You don’t have to move cash. You just keep your same old shares of Apple or Coca-Cola or S&P 500 index ETFs or whatever at a different broker. If you already wanted to hold cash, you could also own things like Treasury bill ETFs or ultra-short term bond ETFs and earn interest on top of the bonus, but in that case this bonus isn’t that great because you’re only getting 1% spread over two years.

I’ve explored some of my Robinhood concerns during their 3% IRA transfer promotion. Here is some of that same information copy-and-pasted here.

Robinhood doesn’t allow all asset types, so you can’t own mutual funds, individual bonds, and closed-end funds. Robinhood is not a full-featured brokerage firm. Here is the full list of what is and isn’t allowed. They support the following:

• U.S. exchange-listed stocks and ETFs
• Options contracts for U.S. Exchange-Listed Stocks and ETFs
• ADRs for over 650 globally-listed companies

This means that if you want to move your balance over to Robinhood, you will have to sell any mutual funds (or convert them to ETFs), individual bonds, brokered CDs, and so on. I converted my Vanguard mutual funds to ETFs, and it took 1-2 business days.

SIPC insurance limits and excess insurance. Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which steps if a broker fails. Robinhood has also purchased additional excess SIPC insurance on the private market. From the Robinhood site:

Robinhood Financial LLC and Robinhood Securities, LLC are both members of SIPC, which protects securities for customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.

We’ve purchased an additional insurance policy for Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC to supplement SIPC protection. The additional insurance becomes available to customers in the event that SIPC limits are exhausted. This additional insurance policy provides protection for securities and cash up to an aggregate of $1 billion, and is limited to a combined return to any customer of $50 million in securities, including $1.9 million in cash. Similar to SIPC protection, this additional insurance doesn’t protect against a loss in the market value of securities.

From SIPC.org::

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

Is SIPC a U.S. Government Agency?
No. SIPC is not an agency or establishment of the United States Government. SIPC is a non-profit membership corporation created under the Securities Investor Protection Act.

My brokerage firm has excess SIPC insurance. How does that work?
Excess SIPC insurance is insurance provided by a private insurer and not by SIPC. The insurance is intended to protect brokerage customers against the risk that customers will not recover all of their cash and securities in the proceeding under the Securities Investor Protection Act (SIPA). Under many of these policies, customer eligibility for recovery is not determined until after the SIPA liquidation of the customer’s brokerage firm has concluded and the amount of the customer’s recovery in that proceeding has been established.

Some people have concerns that Robinhood is a smaller company with a history of questionable judgment and violating securities regulations. Robinhood holds the current record for highest FINRA fine ever. As a result, you may choose to limit the amount transferred to Robinhood to under $500,000 in assets (and $250,000 cash) per eligible account type. Here are the different “capacities”. For example, you could have an individual taxable account, a traditional IRA, and a Roth IRA at Robinhood and each one would have $500,000 in coverage. I will be staying under these limits as well, but my IRA balance simply isn’t that big anyway.

Note that if you opt-in (or don’t opt-out) to Stock Lending during the account transfer or account opening process, any securities that are loaned out are no longer protected by the SIPC. This is usually offset by a promise of 100% collateral, but that assumes trust that Robinhood will post that collateral. See Gamestop short squeeze for a very recent example of Robinhood… not posting enough collateral. Therefore, I also don’t recommend Stock Lending with Robinhood.

Robinhood limitations on beneficiaries. Robinhood only allows a primary beneficiary who is an adult. That means no trusts, no minors, and no “per stirpes” instructions. See article.

Whom can I designate as my beneficiary?
To be eligible as a TOD or IRA beneficiary, the individual must be a person who is at least 18 years old, a US Citizen, or otherwise be legally permitted to open a Robinhood account.

Robinhood will also reimburse your transfer fees up to $75 if you transfer at least $7,500 worth of assets. After the transfer is completed, you must contact then via the live chat function and they will reimburse you after you upload a screenshot of the fee charged.

When you transfer out eventually, Robinhood does charge a $100 Outgoing ACAT fee. Ideally, there will be another broker to reimburse that fee in the future, but who knows. Here is their full fee schedule [pdf].

Customer service tips. Robinhood does not have a traditional phone number to reach customer service. You have to go the help section, search for a topic, and then look for the “Contact Us” button at the bottom of the page (presumably after you have read the canned answer and still need help). Then you can either have a Live Chat or request a Callback where they will call you back on the phone at a later time.

Security and Privacy tips. To access these settings on the iPhone app, click on the head/body icon on the bottom right, then the three lines icon on the top left, and then “Security and privacy”. On the plus side, Robinhood supports a variety of 2FA options: SMS, Device passkeys, and Authenticator apps. Scroll down further and you can also opt out of their data sharing.

Bottom line. Two years is a longer hold period than some other broker offers, but 1% of assets is still pretty solid overall and worth considering for transferring some buy-and-hold index funds where you don’t want to move them again for a while. (For example, you might get 0.4% of assets elsewhere, but also only have to keep it there for 90 days and be free to chase another bonus afterward.) Some people may also choose to consolidate their taxable brokerage accounts at Robinhood if they already took advantage of the 3% IRA offer. The deadline for this revived offer is currently June 28th, 2024. The bonus value will most likely be reported as taxable income on a 1099-INT as interest earned, but may also end up as 1099-MISC income. (I am reminded again how good the 3% IRA offer was, as the bonus was a non-taxable increase in your Roth IRA balance as compared to this 1% offer that is at best taxable ordinary income.)

SoFi Invest is offering an increased ACAT transfer bonus up to $10,000 for transferring in new assets. Some of the tiers are double what they used to be, but the minimum holding period was also increased. Valid for both taxable brokerage accounts and IRAs (Traditional, Roth, or SEP).

$25 Referral bonus. As this promo includes existing accounts, you should consider grabbing this new account referral bonus first, worth $25 of stock with an initial deposit of only $10.

Get $25 worth of your favorite stock to start building your portfolio when you fund your SoFi Active Invest account** with at least $10*.

New SoFi Invest accounts (both new and existing accounts are eligible)

• $100 bonus with $5,000 to $19,999 in new assets
• $200 bonus with $20,000 to $99,999 in new assets
• $500 bonus with $100,000 to $249,999 in new assets
• $750 bonus with $250,000 to $499,999 in new assets
• $1,000 bonus with $500,000 to $999,999 in new assets
• $2,500 bonus with $1,000,000+ to $1,999,999 in new assets
• $10,000 bonus with $5,000,000+ in new assets

Assets are now required to remain in your SoFi account for 2 years. This used to be only for 180 days.

Earn a bonus (as described in the chart below) when you transfer investments from another brokerage firm into a taxable SoFi Invest Active brokerage or Active retirement account (Traditional, Roth, or SEP IRA). Bonus amounts are based on the total net dollar amount (incoming transfers less outgoing transfers) of settled transfers from another brokerage to an individual SoFi Invest account during each calendar month. Bonuses will be paid within 14 days of the last day of the month in which the transferred assets settled in your SoFi Invest account. Bonuses will be paid into the same account you transferred investments into. Transfers into multiple accounts may not be combined. Assets are required to remain in your SoFi account for 2 years. SoFi reserves the right to recoup up to the bonus amount from any withdrawals that take place prior to the 2 year period. SoFi also reserves the right to change or terminate this promotion at any time without notice. Important Tax Information: The value of the reward you receive may constitute taxable income. SoFi Securities LLC may issue a Form 1099 (or other appropriate form) to you that reflects the value of the reward. Please consult your tax advisor. SoFi Securities LLC and its affiliates and associates do not provide tax advice.

Note that SoFi Invest does NOT accept mutual funds.

We do not accept mutual funds. These funds would need to be liquidated prior to initiating an ACAT with SoFi. Please contact your brokerage firm to complete this action, prior to submitting an ACAT.

In addition, SoFi will cover the outgoing transfer fee charged by your existing broker:

If you transfer a brokerage account with total asset value over $5,000 through the ACAT system, SoFi will reimburse up to $75 of ACAT Fees from your outgoing brokerage firm.

General Transfer Tips

• Before moving, I would download all your old statements and tax cost basis information to make sure it transfers over correctly.
• An ACAT transfer can take a week or so to complete, so you won’t be able to make any sell transactions during that time.
• Consider performing a “partial” ACAT transfer where you only move over specifically designated shares (ex. only all 100 shares of BRKB) if you wish to keep some of your original brokerage account open. I would personally transfer over all shares of any specific ticker, so that the tax cost basis carries over neatly.
• Compare bonuses across different brokers. Look carefully at the tiers, there may be a sweet spot where the percentages are better.

E-Trade is offering an increased transfer offer for existing E-Trade customers of up to $6,000 for transferring in new assets. This specific offer only applies to non-retirement accounts. You must enroll in the offer first after logging into your E-Trade account, fund within 60 days, and keep there for at least 6 months. These tiers are currently better than their offer for new customers.

Existing E-Trade customers (non-retirement taxable accounts only)

• $125 bonus with $5,000 to $24,999 in new assets
• $250 bonus with $25,000 to $99,999 in new assets
• $625 bonus with $100,000 to $199,999 in new assets
• $1,000 bonus with $200,000 to $499,999 in new assets
• $2,000 bonus with $500,000 to $999,999 in new assets
• $4,500 bonus with $1,000,000 to $1,999,999 in new assets
• $6,000 bonus with $2,000,000+ in new assets

These are relatively good percentages for a more established broker. (Morgan Stanley bought E*Trade in 2020, and is in the Top 10 for assets under management.) Importantly, I don’t see any minimum hold period on the offer page beyond keeping the assets there through the end of the 60-day qualification period after enrollment. (Update: The minimum hold period is 6 months, something but not too bad.)

Overall Brokerage Transfer Tips

• Many brokers will charge an “Outgoing ACAT fee” of $50 to $100 when you leave them. (Notably, Fidelity and Vanguard do not. Schwab allows free partial transfers.) I recommend contacting your destination broker and asking them to reimburse you for this fee, on top of any bonuses. If you qualify for one of these bonuses, your account is probably big enough for them to consider it. The worst they can say is no. You may have to send them a statement showing the fee.
• Before moving, I would download all your old statements and tax cost basis information to make sure it transfers over correctly.
• An ACAT transfer can take a week or so to complete, so you won’t be able to make any sell transactions during that time. As long as you do an in-kind transfer, you’ll just keep the same shares of the same securities as before.
• Consider performing a “partial” ACAT transfer where you only move over specifically designated shares (ex. only all 455 shares of BRKB) if you wish to keep some of your original brokerage account open. I would personally transfer over all shares of any specific ticker, so that the tax cost basis carries over neatly.
• Compare bonuses across different brokers. Look carefully at the tiers, there may be a sweet spot where the percentages are better.

Final update 3/19/24: Cummins has released the final results of this exchange offer. See original post below for past details, although the opportunity has passed. The final proration factor was ~6.99%. However, those with “odd lots” of 99 shares or less were not subject to proration, which created an opportunity for smaller individual investors.

Here are my stats:

• Bought 99 shares of CMI @265.86 (2/26) for $26,320.14
• Tendered all 99 shares, exchanged for 1190.95 shares of ATMU.
• Received 1190 ATMU shares and $25.24 cash for the partial shares of ATMU (3/19).
• Sold 1190 shares of ATMU @26.15 and 26.14 for $21,076.68 and $10,037.66, respectively (3/19).

Net profit of $4,819.44. This took a total of 23 calendar days, so that works out to an internal rate of return of 1527.59% 🤑 according to my financial calculator. (At 5% APY, my return over 23 days would be about $80.) The absolute ROI is 4819/26320 = 18.3%. Not bad for less than a month! I hope that it worked out just as well for everyone who chose to participate.

Update 3/15/24: This exchange offer is now expired and the preliminary results have been released. The final exchange ratio was 12.0298, which means 99 CMI shares will be exchanged for 1190.95 ATMU shares. Out of the 5,574,050 shares that will be accepted for tender, 1,006,609 of those shares were from odd lot holders. That’s a relatively high amount, but still less than 20% of the total and odd lot holders won’t be pro-rated. On the other hand, everyone else who held more than 99 shares will be pro-rated down to approximately 6.7% of tendered shares.

ATMU has been seeing a lot of short interest, and may even be experiencing a bit of a “short squeeze” right now. This may be partially due to people hedging their bets on the stock. ATMU stock is up about 17% since this exchange was announced in mid-February. You might have made more money simply buying ATMU at the announcement rather than participating in the exchange! (You could have even made more money letting people borrow those shares to short.) As I said, this is as much an educational opportunity as a profit opportunity. I’ll have to keep an eye out for the ATMU shares showing up in my account. The two choices are to (1) sell all shares immediately, or (2) hold the ATMU shares for a couple months until the short interests and other market pressures subside. I’ll probably do the former, but here is another opinion on the latter.

I have no idea what the value of ATMU will be when the shares arrive (rough guess 0-2 weeks) and when I sell, so I won’t bother to post speculative numbers. I will provide a final update after selling.

Original post from 2/25/24:

Back in May 2023, Cummins (CMI) spun off a company called Atmus Filtration Technologies (ATMU) which makes products for commercial vehicles and equipment (think big rigs, agricultural machines, and yellow construction equipment). Cummins still owns about 80% of ATMU and are trying to complete the split-off via an exchange offer to CMI shareholders: tender $100 of CMI and receive $107.53 of ATMU in return.

Similar to the Johnson & Johnson odd lot tender from last year, this ~7.5% premium is meant to incentivize the deal and make sure it happens successfully, and as a result it may be “oversubscribed” with tenders having to be pro-rated. However, there is an “odd lot” provision in the deal, where if you only have 99 shares of less of CMI and tender them all, you won’t be subject to pro-ration. This is a corner of the market where small individual investors have an advantage that the bigger money can’t access.

Please know upfront that I’m not an expert on this stuff, and there are risks involved. The following two articles and the official informational site explain the various details and risks in much better detail.

• Cummins: Odd Lot “Arbitrage” Opportunity (Eagle Point Capital)
• Atmus Filtration Spin-off Deep Dive (Stock Spin-off Investing)
• Cummins Launches Exchange Offer for Separation of Atmus Filtration Technologies Inc. (Press Release)
• Official Cummins/Atmus Exchange Informational Site (Okapi Partners)

From the official site above that tracks the share prices for the exact tender ratio (upper limit not in effect at time of writing):

If the Exchange Offer is oversubscribed and Cummins cannot accept all tenders of Cummins Common Stock at the exchange ratio, then all shares of Cummins Common Stock that are validly tendered will generally be accepted for exchange on a pro rata basis in proportion to the number of shares validly tendered, which is referred to as “proration.” Stockholders who beneficially own “odd-lots” (less than 100 shares) of Cummins Common Stock and who validly tender all of their shares will not be subject to proration. Direct or beneficial holders of 100 or more shares of Cummins Common Stock will be subject to proration.

For each $100 of Cummins Common Stock accepted in the Exchange Offer, you will receive approximately $107.53 of Atmus Common Stock, subject to an upper limit of 13.3965 shares of Atmus Common Stock per share of Cummins Common Stock. The Exchange Offer does not provide for a lower limit or minimum exchange ratio. See “The Exchange Offer — Terms of the Exchange Offer” in the Prospectus. IF THE UPPER LIMIT IS IN EFFECT, YOU MAY RECEIVE LESS THAN $107.53 OF ATMUS COMMON STOCK FOR EACH $100 OF CUMMINS COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

To quickly summarize the potential deal:

• Buy 99 shares* of CMI at your broker, for an approximate cost of $26,133 (as of market close 2/23, will change daily).
• Tender ALL your shares through your broker. You can’t own 100+ shares and only tender 99. The deadline is supposed to be March 13, 2024, but some brokers may require your tender instructions earlier than that. (At Fidelity, it is 03/12/2024 7:00 PM ET.) Your broker may have an online form to fill out (look for “Corporation Actions”, or you’ll have to call them).
• If all goes smoothly (not guaranteed!), then you’ll get ~$28,100 of ATMU approximately 7 business days after the deadline. You can then sell the shares for cash if you are not interested in actually holding the stock as an investment. At the 7.5% premium, the potential profit is ~$1,960. You may get less depending on the relative share prices of CMI and ATMU.
• * You can buy less than 99 shares for less financial commitment (and less upside), but you have to tender them all.

This is the type of deal that I find both interesting and educational, on top of having a positive expected value. Warren Buffett today wouldn’t bother with this deal, but Warren Buffett age 14 might. This is a calculated gamble, rather than a fixed return. There is risk involved, including either the deal being canceled somehow (you end up with 99 shares of CMI at whatever market price) or the limit ratio being reached and you get less than a 7.5% premium of ATMU shares. This is also an area where a broker with good customer service is useful (I use Fidelity). You should perform your own due diligence.

Disclosure: I ended up deciding to participate and bought 99 shares of CMI after publication of this post (which was on a Sunday night). During mid-day trading on Monday, I bought 99 shares at $265.xx a share. This is not a recommendation to buy.