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Compass Diversified Holdings Message Board

  • mthiker2004 mthiker2004 Nov 12, 2010 5:54 PM Flag

    Massive dilution!

    The sky is falling!

    Or maybe not.

    Here are my data points from the filings: Shares o/s before secondary, 41.9m; after secondary 46.2m; three months CAD $23.8m; CAD/share before secondary $.568; CAD/share after secondary $.515; distribution before secondary $.35; presumed distribution after secondary $.35; net worth before secondary $518m; net worth after secondary $590.7m; net worth/share before $12.36; net worth/share after $12.785. (That's right. The net worth/share increased as a result of the secondary pricing above book value.)

    So ..... Yes, total shares were diluted by 10%. Yes, total CAD was diluted by 10%. Of course, that assumes this money won't ever be invested or otherwise improve CAD in the future. And of course, even after dilution, CAD exceeds the distribution by $.165/share. However, net worth/share increased from $12.36 to $12.785/share after the secondary.

    IMO, any secondary that prices in excess of book value/share, is a windfall to existing shareholders, just as any secondary below book value (or NAV for the BDC folks), is a true dilutive secondary (ie., PSEC's serial secondaries last year).


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