I am currently out of CSE, but follow it closely. The spreads on all unclosed, but announced deals are wide right now. I bought a tone of ADS last week at 51. The deal is at 81 and change. It is back to the 60-s and still at huge discount. There are numerous others like HUN at 24 with a deal at 28.25. This is just a fear factor. Remember, CSE is still in the process of starting their own bank so as long as this drags on, they get closer to being ready without having to buy TONE. I don't like the TONE deal because of price and risk in the portfolio. I would rather CSE convert to a BDC and dump the REIT structure altogether so they could get rid of the MBS they own. Other BDCs are now selling at below book so they make a better bet than CSE. I am concerned that if this trades at a similar discount we are looking at 10, not 20. Finally, if there is a drip, every share bought is not dilutive to us, but only to the buyer as it is still above book value. So any purchase at this price through the DRIP is accretive to book. So thanks to all drip buyers.
"I don't like the TONE deal because of price and risk in the portfolio"
If tone mngmnt has taken the full write down, and still had positive earnings, that's excellent in comparison to the big banks, and already tone is selling for less than book, so it is cheap historically.
I think downside to owning tone is low.
Also I believe downsize is low for CSE too imo. CSE has a much better track record than most BDC's at growing profits, and CSE does not take the equity risk that a BDC takes. Equity losses have caused large sp losses for some BDCs. CSE's risk is more real asset collateralized. Stronger profit and dividend growth, along with less risk are strong reasons to justify the higher book value for CSE vs. most BDCs.
"Remember, CSE is still in the process of starting their own bank so as long as this drags on, they get closer to being ready without having to buy TONE."
Keep in mind though that deposit based funding will greatly reduce CSE's funding costs leading to a nice increase in earnings.
Agreed that DRIP purchases are acrettive to current shareholders...good call to remind all about that.