Here is my plan to restore RAS to the rock solid co it was just a short while ago and to get the pps back into the $ 20-30 range:
Defer the issuance of new shares for 4 months. Instead,using various brokers, buy back 32 million shares over 3 months in a very furtive manner, at a cost of about 225 million dollars.
By buying back one-half of the outstanding shares, on an apples to apples basis, earnings in 2009 will go from apx 2.00 per share to 6.00 per share because of the 50 % reduction in shares and the 65 million of less dividend payments,
Once you announce the completion of the buy-back along with the projected earnings--it will take no more than a week for RAS pps to hit $25-30 on a frenzy of short- covering and various upgrades. Believe me,it would work. Then when RAS hits 28-29, you can announce a shelf- offering of 9 million shares at 25.00 and get back all the money it cost to buy-back the 32 million shares.
The final result would be, 41 million shares outstanding and a pps in the range of 20-25.
It will be interesting to see what the stock does tomorrow, but it sounds like they are doing exactly what they ought to be doing; keeping focused on surviving into the long term and protecting long term shareholder value.
They just bought back at convert debt over the market and have gains to cover losses. They are suspending the q3 dividend but not saying anything about dividends beyond that.
Alesco Financial Inc. Buys Back Over 56% of Convertible Debt and Suspends Regular Quarterly Cash Dividend for Third Quarter of 2008
Thursday September 11, 4:21 pm ET
Buying back shares during a credit crunch is insane. Just ask the former shareholders of Poloroid and the dozens of other companies that used the cash that could have kept them from bankruptcy to buy back shares.
The share price of RAS is reflective of the fact that their survival is in question. Using cash to buy back shares rather than reducing debt or building reserves makes their demise that much more likely.
I thought there are about 63 +/- million shares out.
Your post seems to indicate there are 73 million out there.
I'm a bit of a greenhorn, please help me. What is the right number?
I would guess that 10 million shares would be a big difference.
An interesting scenario. To do it furtively, RAS would have to announce a $225M buyback program, however. They can furtively do up to $75M now (because that buyback program is announced) and at current prices get maybe 10 to 13 Million shares. But they can do it furtively, because with the program announced, everybody knows its possible and (importantly) it doesn't have to be announced until its over.
There would be no effect on the dividend while the buyback was occurring, so deREITing would not be necessary, at least within the context of a 4 month buyback program that started on the first day of a new quarter and ended when they reported the previous quarters results (usually about a month after its over). If they stretched out the dividend announce they might get another few weeks, and so long as the shares weren't retired the dividends would be paid to RAS.
In other words, everything about your plan is doable except the scale. To do $225M they'd have to announce it in advance and then wait long enough that the market stopped believing it might happen (basically where we are now with the $75M buyback.
The effect of a 10 to 13 Million share buyback would probably be pretty close to what you suggest, however, and I remain sure that it will eventually happen.
Betsy should show more cleavage and jiggle those puppies a tad more during conferences. Daniel should practice focusing attention on his mother or impersonating dining room furniture.