No I do not think you are missing a thing. Herb Greenberg of CNBC participated in an attack on ALD by shilling for the Greenlight hedge fund. It certainly is a big problem.
This BDC are perfect targets. The portfolios are tough to value and illiquid. So if the shorts can create enough fear or deploy enough influence to drive off borrowing capacity the attack creates it own wind.
The rights are fully transferable, tradable and owners can back stop ‘unused rights’. The shares will also be issued at a discount. So, if you have the right there is certainly an opportunity to arbitrage by selling the common short while holding the option / right. You are correct they arbitrage the spread. The time window allowa for all sorts of additional mischief.
A rights issue puts downward pressure on a share price. It is the nature of markets that not all owners will value the right the same. A rights offering done correctly with tradable rights like this one but at a discount will generate additional downward pressure because it is some what dilutive to existing holders.
The table was set.
Which is a long way of saying we agree completely. I really hope the market gets back to functioning efficiently because I like investing rather than guessing how some jack ass might fix the game. We need the uptick rule back.
I have two thoughts on today's market activity in regard to MCGC.
First of all, I wonder if what we saw today was an "exhaustion gap", common to the sell-off of a stock, signalling a bottom prior to a recovery. The stock held at $7.71 and that may have been too much to lose for some holders, too cheap to pass up for others. If that is the case, then the future will tell if there are no more sellers to sell, having left ownership to the adults. If it is not, then the greater fools bought in today.
The other question we have to ask is if the action taken by the directors had the effect of splitting the value of MCGC between the stock and the warrants. If so, just add the market value of the warrants to the share price and see what we come up with. When the warrants turn up in our brokerage accounts, perhaps we might not have had as much damage today as we thought we did.
The downgrade may be coincidental, but management was leading with its chin when it decided to grant rights that would vest significantly prior to the rights-pricing date. Seems like a short's dream set-up.
I agree 100%. I was about to post a message saying the exact same thing. I blame management for letting things get to the point where they have to raise capital in the worst market for financials in last 40 yrs. This really expensive equity capital and with the latest haircut they are not raising as much as they need. The guy that issued the "downgrade" in the middle of the rights offering should be investigated.
Well, for starters, I don't think I would have adopted any plan that set the rights-exercise price later than the record date. that would have prevented shorts from acquiring rights in advance, then jettisoning the stock and concentrating on driving down the price. The current set-up was an open invitation.