...worried about the delutive effect of the new offering. How low is this stock likely to fall in the short term, and what is the new offering's effect likely to be on the stock's price longer term (say six months out)?
Thanks to all who respond.
This is not truly a dilution situation in the sense that the money raised will be used for two things. One it retires debt and two it will be used for investment that will increase return. Both of these are advantageous to those of us who already hold the stock and as long as the investments are good (and ACAS has an excellent history in this regard) it will eventually lead to a ROI in both share value and dividend.
<My off the wall arithmetic says the dilution comes to about 1/12.>
It's NOT, not, NoT, nOt, nnnoottt dilution in a BDC... That being said, the price won't rise much from here, IMHO, until the dividend rate increases.
The total offer size is 10 million shares. This represents a 12% increase over currently issued shares. Normally a change in supply of 10% or more can have a significant impact on the stock price, HOWEVER, since so many shares will be "borrowed", (which may compete with existing shorts for shortable shares),this effect may be minimized. At this point, just consider me CONFUSED!
Don't forget that shares sold in the open market are immediately accretive (not dilutive) to the book value as long as they are sold above the book value price. This concept is often difficult for people who deal in regular stocks to perceive. The principle holds true for all REITs, M-REITs, and BDCs.
We will have to see where ACAS's share price ends the day but as of trading right now there seems to be a marginal affect on the share price. I thought that it might present a buying opportunity and maybe it has but with a very small discount. ACAS has been so strong that this could be the SOP for secondary's in this environment.