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Prospect Capital Corporation Message Board

  • ravensberg1666 ravensberg1666 Nov 27, 2012 10:14 AM Flag

    Schedule 14A dated 9/10/12

    I suggest that anyone interested in the 12/7/12 proxy vote read Schedule 14A, conveniently located on PSEC website; especially pages 22-28. It goes to great detail to explain how secondary stock offerings below NAV are dilutive. My understanding, after wading through the language, is that stock offerings above NAV therefore are accretive, but my understanding is not always perfect, I must admit. That a stock drops following a secondary offering is a separate issue as to whether it is dilutive or accretive, it is simply how the market chooses to respond based on accurate or inaccurate information, however the case may be. To those who can't tolerate the sudden swings associated with BDC SPOs (Business Development Company Secondary Public Offerings), you might consider alternate investments, because these events are rather routine, as are their public debt offerings.

    Sentiment: Buy

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    • If your an active trader, you can sometimes game the offerings. I keep a core position that continually reinvests the dividend. I like the long term prospects of Prospect. I also have positions in other BDCs and mReits. When there is an offering above book value (therefore accretive) and the market reacts poorly to the increase in market cap, I sell one of my other investments that is selling above book value. It is only a matter of time before that investment has an offering and is dragged back to book value. When the new investment trades at a premium to book again, I sell the additional shares (those above my core position) and wait for an offering somewhere in my portfolio. I'm fine waiting for PSEC to recover to the 11.50 range while I collect the already declared dividends. My only issue is that I'm now overweight both BDCs and Mreits as they've both dropped at the same time.

    • Thank you for the informative post

      Sentiment: Strong Buy

 
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