Not without accretive news, imo. Cad per share has to increase, the next spinoff is announced or some other good news comes out. I still say a combined 40 to 50 before year end. That could be 18+22 or 19 +25. IMO, the movement will come from nsam without positive nrf news.
Forgot the dividend. Forward sales price gets reduced on ex dividend day(s) by 40 cents. This is logical because short DB has to pay 40 cents to lenders in lieu of the dividend.
If all of the forward contract is closed before Nov ex div, no reduction. To the extent not closed until after Feb (or early Mar) ex div, then 80 cent reduction.
Option exercised in full so 3.1625 million shares issued netting 85.2 million or 26.94 per share, net, net.
So, the 6/30 book value per share of 31.51 becomes 30.88 per share with this issuance, a 2% dilution of bv per share.
Deferred tax assets of 151,669 at 6/30 / 19,759 6/30 shares = 7.676 per share.
Add 3.1625 million shares = 22.9215 total shares and the deferred tax asset per share is now 6.617 per share.
So, 31.51 bv - 7.68 = 23.83 bv without deferred tax assets.
Now we have 30.88 - 6.62 = 24.26 bv per share without deferred tax assets.
Closing price before offering was 28.39 / 23.83 bv w/o dta = 19% premium.
Close today at 27.70 / 24.26 = 14% premium.
Pay attention before the slow, lazy market figures it out or has it handed to them with 3Q earnings report.
The price to the public is negotiated between nrf and the underwriters. Remember, this is an underwritten offering, not a "best efforts". The underwriters buy the entire offering at a discount to the public offering price. The underwriters' discount is also a negotiated amount.
The price to the public has to be at a sufficient discount to the pre-announcement closing price to induce tutes to subscribe to large blocks of stock. The pre-announcement close was 18.85 so 18.40 is 97.6% of 18.85.......a 2.4% market discount.
The underwriters take the risk of not being able to sell all the shares at 18.40 plus they want a profit so they negotiate an underwriters' discount amount which in this case is 45 cents which is 2.45% of 18.40. Thus the underwriters pay 17.95 for shares which they try to sell for 18.40.
This one did not sell well to the tutes. Let's say, just to illustrate, that tutes subscribed to 18 million shares out of 45 million the underwriters are trying to sell. YIKES. The underwriters own 27 million shares of nrf which cost them 17.95 per share. They don't want to hold any shares, so they sell in the open market at whatever price they can get hoping to unload at a profit.
The underwriters are eating the poor reception from the public. Instead of making 45 cents per share, they are taking whatever they can get above 17.95 per share, just to unload. After they have sold their long position they will sell short their option shares if they can get more than 17.95 because they have no risk on the option shares. NRF has a contract to sell up to 15% more at 17.95. As long as the price stays above 18, the option will be exercised in full.
BTW, if option exercised in full, which I expect, nrf issues now another 2.25 million shares and DB borrows and sells short to the underwriters another 4.50 million shares. NRF is then short against the box 34.5 million.
So I estimate this offering will end up a penny or so close to the following:
NRF sells 15 million at 17.75 = 266.25 million,
NRF sells 2.25 million @ 17.95 = 40.39 million
Cover short, 34.5 million at 17.90 = 617.55 million (assumes 5 cents of interest charge).
Total shares = 51.75 million. Net, net proceeds = 924.19 million = 17.8587 per share. Round to 17.86.
Add 5.55 cents to NSAM cad x 25 = 1.39 added to 18.72 pre-offer price = 20.11 price now. The slow, lazy market will catch up some day.
Underwriters have 30 days to exercise option to buy an additional 6.75 million shares at 17.95 per share.
Since option is not limited to covering overallotments, underwriters can sell short at any meaningful price above 17.95 because they have a guaranteed cover price of 17.95. Since these guys will cut their grandmother's throat for a nickel, you can bet they are shorting today at 18.12. Whoopee. They make 17 cents per share instead of 45 cents had they been able to peddle all at 18.40. This one was way undersubscribed so the underwriters are dumping and shorting until they unload 51.75 million shares. As long as they get more than 17.95 they make a profit. Then the sell pressure stops.
Tutes hold too big a percentage of shares. Tutes don't drip. Population of retail shares too small to justify cost of discount drip program.
Got cut off by yahoo. Adjusted issue price = 17.8916625 x 30 million = 536.75 million proceeds to nrf.
This calculation is done every day the contract is open. The federal funds rate fluctuates daily. I do not know if the loan rate fluctuates.
Why do this??
1. NRF does not need the cash now and does not want to be stuck with dilutive shares outstanding.
NRF will have to record dilutive shares in calculating eps and cad p/s ONLY to the extent of the number of shares needed to be issued to cover a market price in excess of the forward sale price.
2. NRF does not expect the price of its stock to go up enough in the next six months to justify the cost of a second offering. To the contrary, flat cad per share for 3 and 4Q could cause price to go down.
NRF has the option to settle the forward sales contract in cash or shares equal to DB's profit or make whole. They might do this if they had no use for the proceeds of issuing 30 million shares. This won't happen so I will not explain it.
So don't be hoping for price-spiking news from NRF in the next 6 months. Hamo can't see any coming. Otherwise he would not have sold 30 million shares short.
The prospectus for this offering with the blanks filled in was filed last night. NRF sold 15 million shares to the underwriters for 17.95 per share, netting 269.25 million before offering expenses of 3.05 million for the entire deal including the forward sale contract. So, applying the offering expenses against just this part of the deal, net net was 266.20 / 15 = 17.74667 per share. Let's round this to 17.75 per share (from 18.85 close before offering announced). 1.10 total discount and cost / 18.85 = 5.836%, on the expensive side for nrf.
NRF also sold 30 million shares short against the box using DB as its proxy. DB borrowed 30 million shares and sold them to the underwriters for 17.95 per share. DB collected 538.5 million of proceeds from its short sale. Of course it will pay down debt or otherwise earn interest on these proceeds until the proceeds are needed to buy 30 million shares from NRF to cover its short position. The initial forward sale price is 17.95 per share, BUT that price gets adjusted daily by an interest factor. The interest factor is the federal funds rate minus the "loan rate", which was not disclosed because the forward sales contract has not (yet) been filed with the sec. As long as the loan rate is higher than the federal funds rate, the forward sales price goes down a miniscule amount every day.
To illustrate how this interest factor works, suppose DB has to pay the lenders of these shares an average of 50 basis points per year (1/2 of 1%). Now suppose the "loan rate" negotiated with NRF is 75 basis points. Also suppose the federal funds rate is 10 basis points. The adjustment factor on this day is -65 basis points (10 minus 75). So, since 1% of 17.95 is 17.95 cents, 65 basis points is 11.6675 cents for a whole year. If these interest rates stayed constant for exactly six months and the forward sales contract were settled at exactly 6 months, then 5.83375 cents would be subtracted from 17.95 per share. NRF sells 30 million to DB for 17.8917
I give up. That is NOT how to calculate the effect of inflation. Nevertheless, if you are happy thinking that way, peace be with you.
The day nrf announced its offering which included db borrowing 22.5 million shares Fidelity showed 15.6 million or 15.8 million available to loan witn no htb designation. A minute ago it was 7.8 million. Still no htb.
You people at other brokers...........start a sell short order on nrf. See what the order screen tells you about availability and whether htb fee applies. If so, how much. Or you can do it with a phone call. Please post results to this thread, naming broker.
Here's a copy & paste of my 8/12 post about this co.
Lookee what I found in NSAM's 10-Q:
"In June 2014, the Company acquired a 50.0% interest in Fund Alliance Corporation, a crowd-funding technology platform company for $4.0 million. The Company accounts for this investment under the equity method. In addition to earning a proportionate share of net income, the Company will also earn a net 0.50% fee on any syndicated investments, a minimum base management fee of 1.0% and an incentive fee of 15.0% on contractually defined excess cash flows. As of June 30, 2014, the carrying value of the investment was $4.0 million. For the three and six months ended June 30, 2014, the Company did not recognize any income related to this investment."
NSAM also had 111.5 million of unrestricted cash as of 8/8.
A google on Fund Alliance Corporation found it sold another 5 million of stock in July. I conclude nsam did not buy any of the July round because it was not disclosed as a subsequent event.. This is interesting. NSAM made its first investment in a newly managed company.
You have a constitutional right to be wrong about inflation.
Your preferred dividend will never increase. For every 1.00 of dividend you get today you have 1.00 of purchasing power. With 2% inflation for 20 years you need 1.4859 to buy what 1.00 buys today. Your 1.00 of preferred dividend which will still be 1.00 20 years from now is 67.3% of what you need to have the same purchasing power. You have lost 32.7% of your purchasing power on 1.00.
Likewise, your 25 stock value, which never will go much higher due to the call provision, will be worth 16.825 in today's purchasing power in 20 years at 2% inflation. (67.3% x 25).
Make that 3% inflation for 30 years and today's dollar is worth 41 cents.
When you have no upside, as is holding nrf preferred, inflation is a guaranteed loss of monumental proportions over a very long time period.
Hamo is not the type of guy to live with a little bit of failure. A general reduction of cad leading to a reduction of the common dividend would, imo, cause Hamo to take bigger and bigger risks, reaching for outsized rewards to avoid the dreaded reduction.
Yeah, it takes time to go down the toilet, even with a Hail Mary going bad. Common goes down sooner and faster than preferred, but in the end, imo, both are worthless. Preferred holders have time to see what is likely to come and get out, but human nature tells me preferred holders would hold hoping for a comeback which would probably not come.
It's a matter of degree.....the perception of preferred's safety over common. Very long term preferred holders are taking a guaranteed loss from inflation.....no upside at all..... in exchange for some degree of perceived safety. In my opinion.....and it is only an opinion.....the degree of safety of preferred over common is not what many people think it is. IMO, whatever that degree of safety is, it is not worth giving up the upside of common.
Yeah, I first bought on the March offering for a flip. Too slow a recovery for flip so it became a keeper for yield.
Proof I don't bat 1,000 on these flip calls. At least this one did not go bad on me like that RAS dog I'm still holding.
Better today, but still short of 1.17 increase which an informed investor should have been willing to pay yesterday. 37 cents yesterday and 62 today = 99 cents. It will take more time.
BTW, this is an illustration of how the little guy can be ahead of the market. Know your company and do immediate analysis of developments.
I estimated 1.17 immediate increment from yesterday. Don't know time frame of DB 2.00 increase. If target is a year from now, I agree because the slow, dumb, lazy market will have seen it in the rear view mirror by then.