I see a lot of guessing on this topic on this board so I thought I'd put out my comments.
IMO...with only 4 months into this year, I'm not sure they have adeqaute undistributed earnings to take on new common shares before the June div.
Also they issued those new preferred shares after the last ex-div period with a 8+% div which is far less than the 16+% div they pay on the common stock. IMO opinion, the capital they raised with this offering was akin to an SPO at half the payout...a good deal for them...and I think also a good deal for us common stock holders.
I believe we may see more preferred shares offered after the June ex-div date.
We'll all better understand the furture potential of any new offerings after todays' earnings announcement.
Any thoughts about this?
"IMO...with only 4 months into this year, I'm not sure they have adeqaute undistributed earnings to take on new common shares before the June div."
They carried $180 million of undistributed earnings into Q1. The March SPO shares didn't received the Q1 dividend, so the undistributed earnings account shouldn't be a problem at all.
Assuming Q2 earnings cover the Q2 dividend, they could issue as many as 144M new shares without having an earnings issue.
Slight problem with SPO closely followed by ex-div: they'd have to pay the div to the SPO shares. Which means they'd have to price the SPO with the div added. Which would make the SPO price quite a bit higher, and quite a bit less attractive.
Low basis sells big. High basis with a delayed cash-out, not so much.
It would be a sluggish SPO, and the underwriter would be more likely to have to step in to prop it up by covering their overallocation short in the market, which means they wouldn't come back to the company to cover their it, which means the company would sell fewer shares.
I for one would be highly disappointed if they did a SPO right before a div after they'e gained all this experience at this.
Putting the ex-div before the June options expiration would also be disappointing, but only to holders of June options. The company and everyone else wouldn't notice, so it's not something the company should use as a deciding factor.
So. If you really believe they're hurting for cash, and need to do a SPO ASAP, expect a div ASAPer.
I strongly agree. SPO before xdiv would be a needless churning of capital.
I am assuming that the 300M shares are being authorised as we speak. And they will all be issued over the next four quarters. THis means that fees paid to ACAS will double. That is the silent parallel play. Also fees from MTGE just doubled. That is along with all their other interests. Now I can get on board with YBF touting ACAS, since I got a pile of futures.
Exciting stuff, and one hundred ways to play it.
Anybody giving futures on Doc's shut-eye after this? Keep in mind he will laughing himself to sleep every night.
Hello 32 by close friday... if not before.
If they can do the SPO prior to 5/15/12 it will give them 1/2 of the quarter to invest the money. Half of the dividend, or $.625, would need to be added to the SPO price to make up for not having the money all quarter. As shown above, the shares are already trading in a range where the SPO would be acretive. If the stock goes up much after earnings are announced I think they take the additional money while the taking is good. That is how they make more money for themselves. People do what they are rewarded for most of the time.
I posted this on the MTGE board. I believe if earnings are decent and the stock goes up some early in May that they will have an SPO. I took a rough stab at where the stock would need to trade for an SPO as shown below.
27.71 12/31 book value
0.27 Last SPO accretion
0.83 Add'l Book value from current earnings
0.63 1/2 dividend for 1/2 qtr use of money
1.58 Brokerage discount of 6%
31.02 Minimum price for mid-qtr SPO
I think this is a conservative estimate unless they had really great trading gains.