no matter how low the stock price falls. This telsl the market how little faith the employees have in the company. The market concludes why should the public buy what the employees won't touch?.
The buybacks are suspended because it would cause stock options to exceed 10% of shares outstanding. This is another case of corporate greed. The management over leverages the company and tanks the stock. Then they reward everyone with stock options. I for one have little faith in this management..and I believe the other participants in the market share this view.
So a billion option shares outstanding at an exercise price of a penny per share would not bother you. You also have a very low opinion of the other participants in the market.
I agree with you but see a more tempered view of the discount. First off the 20.59 NAV does not reflect the dilution from option exercises which reduces the NAV to 18.59 per share.
Next the market is now discounting AGNC at 16.4% and ACSF at 17%. If one applies this 17% discount to the 80% of NAV attributable to the BDC spin-offs this amounts to 2.52 per share for a value of 16.07 per share. This values the asset manager at NAV and it is possible that this could sell at a premium but that is yet to be determined.
Granted it is trading at 17% discount to NAV. Yet this has to be weighed against the fact that the yield of 9.4% drops ti a proforma 8.4% without the fee reduction and this equates to a proforma 7% yield on NAV.
Annual expenses, exclusive of interest expense, running 3.4% of stockholders' equity before management fee reduction of .8% (until 2016) to bring net expense to 2.6%. In contrast AGNC is running at 1.5% expense to equity.
You may be missing the forest for the tress. The much touted benefits of the spin-offs is to lower the discount on the BDC's but produce a premium on the asset management company, ACAM.
The market has been somewhat unkind to the BDC's but especially cruel to the asset manager concept. At this time today the market is up over 1% and the BDC's are up about the same. However, the comparable asset managers are down: FSAM and MDLY over 1% and ARES about 1/2 of 1%. These stocks are a preview as to where ACAM is heading. This is the problem and the market sees it.
Further, it now appears that the spin-offs will not occur until the third quarter of 2015. This means that while waiting for what may to be slim pickings you must endure the risk of a market correction (remember "sell in May and go away""0.
You are still assuming that the spin-offs is the right strategy. Yet based on comparisons to comparable companies today there appears to be little to no value added. Buying back at 14 per share against a 20 NAV makes 6 per share for a 43% gain.
My comparison to peer groups was not limited to BDC's but extended to to post spin off companies: including ACSF, FSAM, ARES, MDLY.
Interesting that many bullish posters have carefully analyzed every sale and CLo but have misjudged the larger picture. Many of these same posters continue to ignore the $1.95 per share dilution from exercising the in the money options and look the other way when the peer company prices are hitting new lows. I continue to be long but skeptical that the stock is worth more than 16 to 17 per share.
You need a tax adviser. The FMV of the new MDT will be determined at time of issuance. If the deal were today it would be about $75 or about $16 more than your example..
Is that the stock will continue to hover at current and lower levels for some time and then JF will make an offer to take the company private at about a 25% premium to the then share price, thereby taking the recovery upside away the shareholders. Clearly, it could be argued that the suspension of the dividend after a promise to continue it for a year was designed to crush the price of the stock. I believe my fear of a going private strategy is a factor in the current market price.
ACAS thinks its better than buying back ACAS stock at a 30% discount. This tells you what they think about the value of their stock. It also creates a market view,:"If they don't want to buy their stock why should I?"
Any distribution of ACI to the extent taxable will be a taxable as a Qualified Dividend distribution from a C Corporation. It will not be taxable as ordinary income.
True, ACAS is worth more than the current price. But with a single digit ROE it is worth less than NAV. It apoears to have earnings of about $1,25 and therefore a growth in NAV of about 6% to 7%. If it can achieve closer to NAV in the short term it is a good investment. However, if it takes longer term then an alternative investment fairly priced but growing at 15% or more is probably a better investment. If ACAS had $2.00 per share of earning power it would be selling for at least NAV.
That is correct. However, the main point is that with the stock apparently so cheap there are no company buybacks and no insider buys.
Add to your list that Mr. Market is subtracting a few dollars from NAV for dilution from stock options and deferred taxes for losses. For those who reject this possibility consider further that Mr. Markets doesn't like companies that loot the shareholders by granting stock options
equal to about 20% of the shares outstanding. This is at low stock prices created by prior management mistakes. Another reason Mr. Market doesn't like deferred taxes for NOL's is because it reminds him that they arise from bad investments. This appears to say that maybe this management is not only greedy but lacking in competence. Lastly, Mr. Market reasons why should I buy this stock when the company has suspended buybacks and management makes only open market sales not buys.
OF course Mr. Market can be wrong and I hope thjs is the case.
Therefore, if there were 1 billion options outstanding at an exercise price of 1 cent per share this would be of no concern to you. However,it, it would be of concern to the person to whom you would try to sell your shares. .
So you would value at present NAV a company with 1 million shares outstanding and 99 million options outstanding. The future is irrelevant, like an oncoming train in a tunnel. I gather you are not a Certified Financial Analyst.