On January 13, 2011, American Capital Agency Corp. (the "Company") and American Capital Agency Management, LLC entered into an Underwriting Agreement (the "Underwriting Agreement") with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and UBS Securities LLC, as representatives of the several underwriters named therein (collectively, the "Underwriters"), with respect to (i) the sale by the Company of 23,400,000 shares of the Company's common stock to the Underwriters and (ii) the grant by the Company to the Underwriters of an option to purchase all or part of 3,510,000 additional shares of the Company's common stock to cover over allotments, if any. The Company agreed to indemnify the Underwriters against certain specified types of liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the Underwriters may be required to make in respect of these liabilities. In the ordinary course of business the Underwriters or their respective affiliates have engaged and may in the future engage in various financing, commercial banking and investment banking services with, and provide financial advisory services to, the Company and its affiliates for which they have received or may receive customary fees and expenses
This following analyst grasps that the new issuance of shares is a positive sign for shareholder!
The new issue is a sign that management is confident in its ability to put the new cash to work at excellent returns for the shareholders.
3. American Capital Agency Corp. (AGNC) - The most obvious thing in regards to AGNC is that they currently yield about 20%. Recently, they have had several share offerings and while many investors see it as a negative, I believe it shows the strength of management. By doing the share offering, it is allowing for AGNC to invest their capital wisely while rates continue to be low, which shows their commitment to the long term success of the company. While they may not hit my initial goal of $45, I would not be surprised for them to come close to $40 within the next two years, which would equate to an average yearly gain of about 40% as long as the dividend stays unaffected.
First, this is the offering already in the works.
Second, you should avoid investing unless you understand the mechanics of the business. The last three sales were all above book value, thereby increasing the equity for current holders.
More importantly, the equity sales were timed to take advantage of the current short to long rate spreads to earn even more for current holders as well as providing new buyers with a great return (high yield with modest capital gain potential).
From what you wrote, you think that share sales are dilutive and reduce earnings potential, when the opposite is true.