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American Capital, Ltd. Message Board

  • bd_jwt bd_jwt Nov 6, 2007 12:47 PM Flag

    To what degree does ECAS matter?

    ACAS valuation of ECAS only relates the Book Value presented on its balance sheet. The most important thing is the Market Value, which is primarily determined by the public and it's calculated value of the company based on its net assets, their investments, and future cash flows. The institutional investors generally play the lead role in determining the said value. All banks/funds are going to use their own valuations - using beta-adjusted analyses on discounted future cash flows and on the respective value of each, individual major portfolio company, including ECAS (and their investments as necessary)

    Keep in mind - just because ECAS is valued on the balance sheet at X, most instutional investors may have already valued at Y. When comparing their valuation to the market's (and ignoring market/economic risk), if their valuation is:
    - higher significantly, they may short and/or buy puts
    - relatively close, they'll probably stay away
    - lower substantially, they may buy the stock and buy calls

    A pertinent issue relates to transparency. The public will not be able to see the depth of information that ACAS has - granted, this info could be good or bad. This an inherent challenge of ACAS being public (and a benefit of hedge/pe/vc funds that can fly below the radar.) Such is life in the capital markets.

    IMO, it would seem that the institutional investors have already accounted for the true value of ECAS and other investments resulting in a market cap that results in ~$41ish per share. Otherwise, the stock would have been blasted, blasted, blasted over the past 10 days; instead, it's ranging from $41 to $43 (very typical considering the market fluctuations)

    At the end of the day, does it really matter all that much if is bashing ACap - not really (IMO) since the price/momentum is determined by institutional investors. If Merrill, Gardner, and other top institutional investors start selling or releasing bearish reports, that's a problem. If there is a mass exodus of inside holders, also a problem. Until I see those, no need to panic.

    Given the DRIP and dividend, I'm going to keep my position in this stock, but I'll I may set a sell limit to protect some of my gain.

    Very interested in the opinions of others. Anyone?

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