With about 39.3 million shares outstanding SIR announces the sale of about 12 million more shares (some 30% more shares) and the stock price goes down only some 9%. Is this because July 2nd is yet to come and the shares will go down another 20% then or will this happen after the 60-day lockup period of the underwriters?
For simplicity, assuming FFO of $3.00 on 39.3 million shares doesn't this become $2.29/share on 51,357 million shares?
Yes FFO will go down if they sit on the money from the new shares. As of the date of the offering they have entered a contract to buy one property for approx 140m,the offering stated that they have multiple bids out for other properties.
My guess is they will buy more properties in the third quarter than cash raised from this offering,therefore FFO could go up based on 50m+ shares.
It all comes down to how fast they put the new money to work
The company also said that it has at least two pending acquisitions which should bolster its growth...the amount of land available for purchase in Hawaii is limited, so SIR will likely focus on growing its mainland U.S. portfolio.
Hawaii is an attractive location for its business too. First, there is a very limited amount of land available for development in Oahu. Oahu only has 597 square miles of total land. However, it has a high population density with almost one million people inhabiting it, and a large majority of all commercial activities occur on this island. Furthermore, much of Oahu's land is not suitable for development, or is owned by the U.S. government and is off-limits to the private sector. With little land available for lease, and few competitors, this creates a very favorable business environment for SIR. In fact, since 2006, the average percent change in annual rents for its Hawaii lands is +43%.