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NorthStar Realty Finance Corp. Message Board

  • octopusink octopusink Mar 24, 2014 2:03 PM Flag

    private share placement

    seems to be be the rage among hedgies, tutes recently in their "hedge fund hotel" names. aamc with their direct to private offering a week ago. today MONIF did a direct to private offering (and price spiking as a result)

    given the nrf hedge fund interest...could this be on nrfs radar? is hamo maybe not thinking about a public offering, and considering negotiating a private offering deal? if theres the big money interest, something like that could be a monster for bumping share price, new shares=new capital and growth and same dilution but not a public dilution. which=huge for share price. hmm.

    Sentiment: Buy

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    • How do you define, "dilution". What is the difference, if any, between "same dilution" and "public dilution"?

      • 4 Replies to dar200
      • basically what dawson said. the overall "dilution" of all shares is always going to be the same no matter how shares are issued. but if they are issued to the general market, those shares will hit the market (and likely at a discount price to current). a private offering is more likely to be held (or conditional) and not hit the general market/float. a private offering (thats net CAD accretive as nrf usually does) shouldnt drop the price at all- as those new issues even if issued at a discount arent likely to hit the open market anytime soon. if anything as the two recent examples show (aamc/monif) should actually spike the price higher.

        not sure this is even realistic for nrf, im just saying would be curious to see how a private deal offering would effect things vs the usual more public offering. my hypothesis is it would be a huge positive on the news, as opposed to the usual "dilution lemming" pullback we get.

        Sentiment: Buy

      • Oh, and you and I are both obviously averse to the use of the word "dilution" when it comes to these offerings, especially when an accretive 1B healthcare deal is on the table.

      • I imagine the idea is that thy yare immediately held institutionally and not available for the general market. Let's say the offering is 250M, priced at 16.50 for 15.1M shares - maybe the institution would be interested in such an investment, but cannot make a similar purchase in the open market within a reasonable time span with any assurance of the price. However, for the ability to make a large investment that would not otherwise be available on the open market with much certainty, the institution pays a modest premium on what would have been a "public" offering. The resultant price stabilizes a higher price and generates interest although this increased interest is not equalized by an increase in shares available. 15M shares at 16.50, increased interest, same non-institutional shares available - I think these might buoy a stronger value on the open market.

        Again, this is just me hypothesizing on the idea as I have only just recently considered it.

      • I think he is just saying that dilution by issuing private shares would be the same as dilution by issuing new public shares, with same potential value of resulting accretive investments.

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