SNH put out a 4:07pm press release saying it has commenced a public offering of 3,250,000 common shares. "SNH expects to use the proceeds of the offering to redeem a portion of its 7.875% senior notes due in 2015, and the excess net proceeds, if any, will be used to reduce amounts outstanding on its unsecured revolving bank credit facility."
"Simultaneously with this SNH offering of 3,250,000 shares, HRPT Properties Trust (NYSE: HRP - News) proposes to sell 950,000 common shares of SNH that it owns. The underwriters will be granted a 30 day option to buy up to 630,000 additional shares from HRPT to cover over allotments, if any. SNH will not receive any proceeds from the sale of shares of HRPT."
The after hours price on the stock is down $.46. I'm definitely new to this stock and dependent on my financial advisor's guidance for the recent purchase. What do some of you who certainly more knowledgeable think about these happenings?
Everyone has different investment goals. If you are here for long term income, then holding SNH is a good investment. I hold 2000 shares in our family trust, and I see no problem here. Adding 3.8 million shares is about 4.5% additional to outstand shares, so the price could drop that much, because they are diluting the shares. . .but, just noticed they are pricing at 18.90, above where it is trading. Paying off debt IS important - especially debt at above 7%. So I see this as a positive move for the long term. . .if you were here to make some quick money. . .not so good.
A basic point that I would make about the share increase is that it does not cause NAV dilution. Also, the way I run the numbers there is not any net income or Operating Cash Flow dilution either.
The negative lies in the fact that with increased shares outstanding it will be more challenging to increase net income and Free Cash Flow per in the future. This is the reason that I would not buy the stock or would sell it if I was so inclined.
Disclosure: using Yahoo numbers and hurrying through lunch! Having had my lunch eaten before breakfast by this deal I continue to HOLD the shares with no further action anticipated.
68,560,000 shares 3,250,000 shares x 18.90=61,425,000 x 5% expense 71,810,000 shares 58,353,750 proceeds
58,353,750 proceeds x7.875% = 4,595,358 savings
Last 4qtrs net income 59,532,000 or .868 adj. for transaction 64,127,000 or .893
Last 4q Operating Cash Flow 1.53 adj. for transaction 1.53
NAV before transaction 12.66 after transaction 12.90 +.24 or 1.90%
SNH happens to be one of my long term (5 year) investments, in at 13 and change, so I am not too nervous. Still a long way to my purchase price, and a good dividend. One of the few stocks that I did not lose money on in 2002.
To me it is a keeper, YET. Never say never on a stock sale however.