As a long time holder of PICO I have very mixed feelings about this offering. The bad news is that the present holders are being asked to put up more money when in almost all cases we have the amount invested in the company we are confortable with. The good news is that someone who has had a very GOOD look at the company has decided to put in $50 million. We can all be very sure that the $50 big ones got to look into all the corners and get all the questions answered. Naturally we as ordinary shareholders couldn't get anything answered, but that is the way wall street works. The most important point is that the $50 is being put in. In all probablity management IS putting up money but that answers one of the old complaints about management which is that they did not have much money in the deal. As far as diluting the current shareholders we can all buy below the $15 in today's market. There seems to be a very direct correlation between our feelings about a company and whether or not the price of the stock is up or down. This has been a very disappointing stock but perhaps, and it is a perhaps, the company has been doing just fine but the market won't give it any credit. As we all know this market is very narrow in its winners. Classic value build ups like PICO are more than dead in the water. They have always said that the build out of their water basin in Arizona was $10 million. Remember that the big cost of these water holding areas is the pipeline getting the water to the user. If the reservior is near an existing pipeline, as is true in PICO's case, than all is required is a line in, settling areas, and pumps to get it out. What is most disturbing to me is that they have not either made the insurance operation larger or gotten rid of it. It seems to be very dead capital. I would expect good news BEFORE the rights offering because they would be very liable is they released it any time afterward. They will have to have an offering circular and we will be able to see something. If they release good news before the offering then the price will go over the $15 number and it will be easier to pull in the money. Remember they do want the additional capital. They have always said that there is a current window to buy cheap water assets which will close in another year or so. Good luck to us all.
is if someone has said they are willing to pay $15, this market is incredibly inefficient in allowing the stock to trade at 14 1/16.
I added to my position on the news. To those who have ridden this one down and think every other stock has gone up except this one, you need a reality check.
Present holders need do nothing they don't WANT to do. In my mind, it would seem to me if you are not a buyer in the rights offering you should be a seller of the stock.
Perhaps that is what we saw Friday. One day does not make a trend and I'll be watching to see how holders react when they think about this opportunity.
It is evident to me the Board of Directors was not interested in doing a secondary offering at below book and that is why it is being done in the manner announced. The Board believes the market has undervalued its shares and to protect the shareholders from being diluted this is the only way to proceed. That is of little consolation to the short sighted, but they will be gone long before the offering becomes effective.
If your portfolio has grown this year, I recommend buying NOW while it is below the rights price. The window of opportunity will close and you can kick yourself into the next century if you coulda and didn't.
As to the $10 MM cost, I guess I'm just having a tough time wrapping my mind around a cost which appears low to me. I know what 1 MM acre feet looks like. To be able to double that capacity and to do it for only $10 MM blows me away. Engineering, legal, approvals, constuction, interest, taxes, etc. add up. I hope you are correct.