Considering AEP will have traded 10 million shares today, there is ample evidence that there will be willing buyers for the 50 million shares at around 21. The dillution and dividend cut are now built into the price, and the market has spoken. . . what isn't built into the price is the great first quarter earnings on cold, cold, cold weather! EVEN in Texas. . .
So let's see... 50 million shares available. I wonder if Dr. Draper et al have signed up for their allocation. After all, this must be a positive move. Something I was once taught: companies do secondaries when they believe that their stock is overvalued. Otherwise it makes no sense. What price was the last secondary done at? Hmm. If any one read Kramer's piece today, I'd like to hear a summary of what he said (it was a subscriber-only post on TheStreet.com).
If the pump strategy really is working, that is scary stuff. Did you notice that the same banks (Citi and JPMC) are doing the stock offering and the credit facility? I know that investment banking calls for this sort of back-scratching, but I am not so sure that the credit facility would have gotten done (or been as big) without the stock fees to follow.
Here is Cramer's article. The end is pretty good stuff.
What's worse than no deals? How about deals no one wants? Fifty million shares of American Electric Power (NYSE:AEP - News) coming right at you.
This period's developing into a multiple insult to the bulls. Now cash-strapped accounts around the Street are trying to figure out where to put this AEP. To me, this one's a bad version of the Bank of New York's (NYSE:BK - News) secondary and a worse version of the Duke Energy (NYSE:DUK - News) deal. There's simply no place to put this stuff.
So what happens? Typically, stocks go down. They go down all around the sector. I just hope the damage is cordoned off, limited to the sector. I don't think it can be because there simply aren't enough non-decimated players in the sector.
Not only that, but there are probably another handful of deals just like this around the corner, in the same sector.
My advice? Sell anything you have in this sector. The bloodletting's not over; there's still more to come.