Love ROIC but can't seem to pull the trigger because those warrants seem to hold back shares from going anywhere and serve as a potential dividend reduction once warrants are excercised and stock heavily diluted. Anyone have any thoughts here? Otherwise, love the Real Estate acquisitions and long term prospects.
Well about 2 weeks left in the quarter. If they are going to announce something about resolving the warrant issue this quarter, it will be soon. However, last CC they indicated action on the issue within 3rd or 4th quarter (after saying in Q1 CC that they would handle by 3rd Q).
The volume really spiked on the warrants today - nearly 1.4MM traded today. There was a big upswing in the afternoon and then huge blocks in the downdraft at the end of the day. The price on ROIC held strong into close. I doubt the volume is related to corporate buying. Any thoughts?
Without the warrant, if roic spends all the cash to buy up properties at 6-7% yield (after their improvement), roic shares should be worth $17-18 if it's yield levels at the general REIT level of 4%.
To deal with the warrant, they could do two things: borrow money ( they said they would do this) to invest in properties at 6-7% yield. Use any money from the warrant($12 per share) to pay back the loan in four years time.
Or they would buy back some of the warrants. They had authorization to buy more than half the warrant if they can get it at below $2.
If I am the CEO, I would do as much of the borrow and invest and then buy up the rest of the warrants that are not needed for repaying loan.
All in all, I expect less than 20-30% real dilution. That is, the share should worth $14-15 in a year or two. Not bad with it's current yield. But look at the warrant roicw. They should be worth $3-4 in a year or two. They are trading at $1.13 right now.
I am long roicw
the numbers work if the CEO can execute... and from the Conf Call there was discussion of the prime Seattle property owner "selling" a part of his shopping center to ROIC in exchange for shares in ROIC... avoids capital gains for the seller, diversifies his holdings, and would demonstrate confidence in ROIC... such "up-reits" are winners (provided everyone plays fair!)
I am in with the warrants... and trading pattern suggests this is not dead money