1.) ROIC will keep the dividend in Q2 at $0.14. This will deliberately keep the share price anchored close to $12, all else being equal and warrants close to $1 (anyone else curious why the company utilized 60k shares of the ATM offering last Q...after using 80k in Q3? Are they trying to keep the share price below $12...at least temporarily?
2.) An exchange offer for the warrants will be produced sometime in Q2 or Q3, while the trailing dividend is set at $0.14. The exchange offer will close by end of Q2/Q3
3.) The opening exchange offer to warrant holders will be weak. It will offer $1.25-$1.40. This will leave negotiating room to upward adjust the offer if necessary.
4.) If the company is aggressive, they may push the limits of the Warrant Agreement, trying to bind holdouts. If they take this step, expect litigation. Warrant holders enjoy protections against splits and share based dividends per the warrant agreement. The Warrant Agreement can be changed by the vote of a majority of affected holders per the agreement:
"All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the registered holders of a majority of the then outstanding Warrants and no modification or amendment shall affect the Public Warrants, the Private Warrants and the Co-Investment Warrants differently from one another."
However, as this attorney points out in a discussion of the Talbots/BPW Acquisition warrant exchange, there is a legal defense that was not brought in that case that the rights of warrant holdouts should not be injured (and the case was brought to the wrong jurisdiction): http://goo.gl/jXur9
The fact set is different for ROIC and a judge is likely to look less kindly on a company trying to bind warrant holders who want to keep their existing security when the company is trying to compel an exchange b/c it doesn't like what it originally issued. In this case, holdouts would not be attempting to scuttle a life-saving merger and take the company down with it. Point being, if ROIC tries to compel holdouts by convincing a majority with a weak offer, there is a legal road to enforcing the rights of the remaining holders. I, for one, would gladly join such a legal defense and hope other warrant holders will as well.
Hopefully it does not come to that and Stuart & Co. will live up to their (great) reputation and come up with a warrant exchange that is compelling on its merits rather than a weak attempt and a back door way to modification. Frankly, I'm surprised that BMO got the advisory nod for warrant modification, give that their analyst didn't even seem to know that they existed in his initial research. That doesn't bode well that BMO is going to produce a brilliant solution to the warrants.0
right, makes sense that they would like the feature. But if they want to control when cash comes in the door -- which they've already stated -- they'll want to alter the terms/exchange for a different instrument, which they've basically stated they are working on. Maybe nothing will come of it, just like nothing has come of the warrant buyback, but given management's comments on the topic in the last call, I'd expect to see a proposal in the next quarter or two.