<<<<.....I feel sorry for the longs here. This will eventually trade down to around book value, like all the BDCs .....>>>>>
Well, here we are again disagreeing!
Not all BDC's historically trade at around the same premium or discount to BV. This is because not all BDC's perform at the same level. The best trade at significant premiums to their peers, just as the worst consistently trade at the largest discounts.
MAIN is one of the best.
Even during the depths of the 2008-2009 credit crisis when most BDC's were priced for BK, MAIN traded at only a modest discount to BV.
MAIN historically trades at a premium to BV and is always at or near the top of the list.
Instead of thinking MAIN has to come down to BV, you should be asking why does it trade at such a premium?
MAIN has increased BV every quarter over the last 11 quarters (it will be 12 quarters as soon as they announce Q2's results). How many BDC's can make this claim?
MAIN has had 3 dividend increases in the last year and still is reporting more NII per share than they are paying out in the dividend. This is why they have $0.88 in spillover income as of March 31st.
MAIN has increased NII per share by over 26% over the last year. That is PER SHARE! Other than possibly TCAP (another BDC that does not historically trade around BV), no other BDC can make this claim or come anywhere near it.
MAIN's total investment's FV marks are over 10% higher than cost. This is due mainly to the strength of the equity stakes MAIN takes in their portfolio companies, coupled with few problem debt investments. Again, MAIN is almost all by themselves in this area.
MAIN is never cheap, but by most any metric they are one of the best in the sector and IMO deserve to trade at a premium to their peers.
Instead of looking at a BDC that trades at a premium to BV as a liability (thinking it has to revert to BV at some point), I see it as a strength. When they raise new equity it's accretive to BV for existing shareholders and their ROE will be greater because their hurdle rate for this new capital is lower. It's a win win for shareholders.
I think you're making a mistake to think the best have to revert to the valuations of the average or the mediocre.
Don't really feel sorry for the longs, but your math is correct. Yes, there are lots of parameters and resons, but the math is sound. Good reply.
PRICE TO BOOK VALUE:
Consider how long that the board of directors is in this stock. They are all on DRIPs making purchases monthly. This is a rare company that actually has the incentive to act in favor of shareholders because no one has more shares than they do. I'll take this small offering as a much better scenario than a split. I agree that they will use the money well and be able to increase dividends. The share price is a bargain right now.
Don't worry. The money from the stock offering will be turned into investments in small private companies and these will be paid back to investors in higher dividends. The offering is a sign of growth.