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RAIT Financial Trust Message Board

  • ethison ethison Oct 7, 2013 2:20 PM Flag

    Summing it up on dilution

    It all depends on when you bought your shares.

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    • "It all depends on when you bought your shares" works better as a summation of "Are you making money" than it does on "summing it up on dilution". The price you paid doesn't really change the question of whether a particular dilution is good for shareholders or not. It may affect whether the improvement puts you in the green, but you get the same percentage changes regardless of the price you pay:

      If, as has happened over the last two and a half years, AFFO rises from 9 cents (post-split) in 1Q2010 to 32 cents, the price you paid doesn't change the 3.5x increase in AFFO or the 2.8x increase in shares (from 25M shares to 70M shares). Either way the gain exceeded the dilution.

      If, as has happened since RAS resumed to paying a quarterly dividend in 2Q2011, the dividend has rises 2.5x (from 6 cents to 15 cents) but the share count has risen only 1.8x (from 38M to 70M), the price you paid doesn't change the the fact that the dividend increase exceeds the dilution.

      If, as has happened since December, the dividend has risen 66% (from 9 cents to 15 cents) but the share count has only increased 37% (from 51M shares to 70M shares, the price you paid doesn't change the fact that the dividend increase is almost twice as great as the dilution.

      Not quite a summary, I'm afraid.

      • 1 Reply to davisfoulger
      • I guess what I meant to say was one's perception of dilution is colored by when they bought their shares. I bought my shares at prices lower than the prices of the secondaries and therefore I was happy the company was able to raise capital that is accretive to earnings at "high" prices. "High prices" are a relative thing too.
        If one bought their shares in early 2007 and held on, one is probably not the happiest:-)

    • Not really! I'm not saying they are but if all things were equal dilution over last 3yrs
      is close to 400% [including cv bond shares]. Theoretically stock price would be
      quadruple. But that's not the issue. Despite df's opinion capital raise was done
      unfairly & cost shareholders dearly.
      The fact capital raise as necessary is one thing, the way it was sneakily done
      is another. That's my opinion,d f stubbornly challenges it. Well,I guess that's what makes
      .horseracing. Who's right? Me of course.

      • 2 Replies to muckahoy88
      • And its NOT my opinion. RAS earnings and dividends have measurably improved by larger percentages than the dilutions.

        Short term results have been more mixed. RAS has gone up after some of its offerings but has more likely to go down in the short term. The same is true for NCT, NRF, ABR, RSO, etc. The price usually falls more or less in line with the discount built into the price of the secondary and they goes back up after some interval.

      • By the way, I looked at NYNY. The approach they took was a reasonable one if you don't need to raise a lot of money, you don't need the money to take advantage of pending opportunities sooner rather than later, and you have a single dominant shareholder who is willing to buy into it. It worked as a fundraiser for NYNY because all of those things were true AND they were selling the rights at a fraction of the price the stock was trading at. While the approach was good in the short term, it remains to be seen if it will be good in the long term, especially if they squander the money on political advertising for a referendum, as appears to be the case. Not something I'd buy, but it may work better than I think. Good luck.

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