About this second offering are off the mark.
These are not shares just added to the current pool of cash. They are shares that have been added, but they are also bringing in capital when they are bought.
You kool-aid drinkers will appreciate this analogy.
Let's say you have a pitcher of kool-aid... so much sugary mix, so much water. Okay, are we together?
In order to dilute the current pitcher of kool-aid, we would have to add something dilutive, like water to make the mix weaker.
We are not adding water to the current pitcher without adding more sugary mix along with it.
Sure, shares are being added to the float, but along with them come more money.
The shares are being bought, but the seller is Capital One, not a current stock holder. There is no dilution...
The mix is just the same, the pitcher just got bigger. There is NO DILUTION with this second offering!
Wake up people!
49 x 18 m goes to balance sheet as funds available for a variety of business investments.
number of shares outstanding increases by 18m and when revenue per share allocated- would be over an increased number of shares.
If the 18m shares x 49 value leads to opportunities to increase revenue , then as an investment , revenue per share may increase as a result of the sale.
If however the funds are used and additional reveune not generated than revenue per share "dilluted".
Hopefully the 18m will go to increasing cof value and hence value for each outstanding share.
Come on, you are joking too? Guys, the virus is spreading. A finance teacher would shred you for saying that. Please check out ROIC, CAPAM, EVA, and DCF analysis for help. EPS is diluted and projected future earnings are not bumped up on the hope that cash will be somehow be invested in projects that will improve ROIC.
This move most likely helps them shore up reserves in case projected losses from delinquencies are exceeded. That is a positive in terms of buying them time. There are a number of ways to raise cash and they found the cheapest which is why it was viewed as good by most on the street.
You start a club to raise money to buy ten dollars. You recruit 9 others and each throw in a buck. You get two 5 dollar bills and hang them on the wall. You each own an equal part. The club loses $5 so recruits 10 more donors to donate 50 cents each. Now 20 people each own an equal share of $10 or 50 cents. The second ten own exactly what they invested. The original 10 lost half their initial investment. They got diluted by a secondary offering.You are adding water to the kool aid, but not enough sugar to keep it sweet!
Actually, this koolaid poster is about 90% right in my calculation. The dilution should only occur if the offer price is dramaticaly less than the actual price at the time of the transaction.
Shres are added to the float, but as he says... The money, or better explained as "market cap" increases with the additional shares.
There are no shares added to the floatsum that do not add cash to the bottom line
The only way that dilution could be considered is if the current price rises way above the secondary offer price BEFORE the shares are transacted. The dilution would be so mild that it would hardly be noticed, even by the strictest of calculations. Great observation IMO.
The guy is dumb, but not 100% wrong... depends on what COF does with the raised funds. Critically, its not replenishing losses, if they want the can use the cash to buy a little bank. Anyway its less than 4% dilution!