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Tsakos Energy Navigation Limited Message Board

  • burnedoutprof burnedoutprof Jan 31, 2014 1:45 PM Flag

    dilution at 20% increase in shares at 12% discount

    to simplify the math, suppose a company has 100 shares of present value $10/sh, total $1,000
    company sells 20 new shares at 12% discount i.e. $8.80/sh, total intake $176.00
    company is now worth $1,176.00 including the new cash, and there are 120 shares
    each share is now worth $9.80
    dilution is 2% to existing shareholders

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    • Wrong. The cash is not going to stay cash. The company said it will go to improving the fleet and paying management. These items probably won't lead to bottom line improvements. Rather, they are necessary operating costs to keep the fleet modern and management motivated. Therefore, the actions are dilutive AT LEAST 20% to shareholders. In reality, the necessity of these upgrades were missed by most analysts. Given this company reports earnings so infrequently, there will probably now be significant worries heading into their report. Probably much better to stay on the sidelines with this name until after they report in April and a clearer picture evolves.

 
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