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NorthStar Realty Finance Corp. Message Board

  • dar200 dar200 Dec 12, 2013 10:46 AM Flag

    Dilution lesson

    Hey, dilution freaks, pay attention. Even though the possibility is very low, you might learn something.

    The public price is 11.65. After underwriting commissions and offering expenses, nrf will net about 11.35.
    The current low end of estimated 2013 cad is 1.03. 1.03 / 11.35 = 9.07% current cad yield on net, net offer price. All Hamo has to do is earn better than 9.07% on the new equity and the issuance is accretive to the old shareholders. On 2013 investments to 11/1, the weighted average yield on leveraged equity is 17%, (with a high of 19% on the pe deals and 14% on the other deals). Let's suppose the new money earns 14%, the low of the range.

    Before this offering, there were about 249 million shares outstanding. Assume these earn an annualized cad of 1.03. Thus, these shares earn 256.47 of cad. The new issue is 57.5 million x 11.35 net, net, which = 652.625 million of new cash equity. Suppose this new equity earns 14% annualized. 652.625 million x 14% = 91.367 million.

    So, old cad of 256.470 million + 91.367 million of new cad from new equity = 347.837 million of pro forma annualized cad. But wait! You dilution freaks always spaz out over more shares outstanding. Yup, 249.0 million of old shares + 57.5 million of new shares = 306.5 million post-issuance shares.

    So, 347.837 million of post issuance annualized cad / 306.5 million post issuance shares = 1.135 annualized post issuance cad per share. Hey, dilution freaks, please tell me how my new 1.13 per share is dilutive to 1.03 per share. Do it with numbers, just like I did.

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15.54-0.03(-0.19%)Jul 27 4:06 PMEDT