It was bound to happen sooner or later. Almost 19 million shares isn't small for RSO. Figure $6.20 per share and that's $118 million. Something up? Or are they just looking to build a cash position?
NEW YORK, NY -- (Marketwired) -- 04/09/13 -- Resource Capital Corp. (NYSE: RSO) (the "Company") announced today that it has commenced a public offering of 16,250,000 shares of its common stock. The Company intends to grant the underwriters a 30-day option to purchase up to 2,437,500 additional shares of the Company's common stock
I cut my position by 20% about the same time as you decrease yours but I am finding it hard not to be buying back some of what I sold at the current prices. I feel that the .80 is safe enough and that this offering at substantially above BV will not only result in an increase in BV but it along with the increased credit line at Wells will result in an increase in eps and an increase in the dividend, hopefully back up to the "buck". It does get frustrating for me to wait for the anticipated dividend increase, but I believe it is coming and in the meantime, at a 12.8% yield, I believe my patience will be rewarded.
Anyway, the best to you and thank you for your well reasoned posts; I for one appreciate them.
"Whew, glad I cut my position down. How can they sustain the 80 cents dividend with this? Remember the promised buck? You can kiss that dream goodbye."
Glad I did the same. Scaled back about 50%. Am content to hold as an income investment and I suspect they will be able to maintain the dividend. They always seem to find a way. For all I know, it might be best to scale it back a bit to get things more in balance. I have pretty well lost hope that they can get equity capital cost back to a reasonable level. But, I do believe that they are going to get back to the old business model. I think they are going to create new securitizations. This move may be needed to get some equity money in the mix to be able to do just that. Who knows, maybe the can get the common cost down, but it's going to take quite awhile.
I put the RSO money into NRF some time ago. They have seen a yield readjustment from over 10% to below 8% now, which allows them to issue equity now at a more reasonable level. So, they balance out preferred and common.
Hi Ruby, I remember when you cut back on your position in RSO. I did also.
First, I sold half and bought the preferred. Now up 19%. Than when
dividend came out, sold half of remaining half.
Bought small position last night at 6.33. Looking for bounce.
i asked about the effect on dividend too. some feel no effect. rso invests in cre (commercial realestate). there was an old article about cre's. "Troubled CRE Assets Take Down Another Six Banks". By Mark Heschmeyer May 9, 2012
i know that it was last year, but the economy as far as what is happening in government is going south with this sequester. some are already feeling the effect. it is a chain event. people that are spending and those that are hording.
i am not trying to scare, but i really am concerned.
I fully agree, there is a reason why RSO is increasing their credit lines and is doing a "follow on" offering. There is also a reason, as has been pointed out that the underwriters and Wells have facilitated RSO in rasing a lot of cash in a very short time. I submit that RSO has a plan for this money that will be implemented quickly and we (Wells, the underwriter, and we the stockholders) will all benefit from.
Thanks again for your timely and insightful posts.
I think that they will put this SO cash to work soon enough and we will soon enough see $6.23 fading in the rear view mirror. At a tad over 10,000 shares I am at my position limit but would otherwise be a buyer "mos def". In fact I still might just pick up a few K shares if it goes any lower, which I doubt. GLL
This is a very good offering. RSO got a good price. Underwriters would not have paid $6.33 unless they knew something. Here's some facts:
1) As of Dec 31, RSO had $95 million unrestricted cash
2) The last CC stated that they had another $105 million in loans that were in the closing stage
3) The avg loan size was larger than normal. They had been doing $10 million loans, but now they are doing $20 million loans.
4) They talked about securitizing the loans -- i.e. another CLO. We know RSO is good at this.
5) Last week, the Wells Fargo credit facility was increased from $150 to $250 million.
6) Today's offering nets RSO another $120 million (plus). Plus any preferred and shares via DRIP
Underwriters would not have paid $6.33 (50 cents above last BV) unless they knew something. RSO would not have increased its credit facility, and followed up with an offering unless they are ready to deploy the cash. Another CLO is very, very possible (say 3-6 months).
Today's offering is good for the common. It's not great, but it's definitely not dilution. I'm very comfortable with this.
Let the price stabilize after pricing announcement- then buy, a very good time to add shares. REITs have to do seconds since they can not hold capital. Likely have something ready to go, they have the B shares they are currently selling, but may not be able to sell enough fast enough to meet the targeted investment. Good news - capital raises are the raw materials for REITs