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.
My comparison to peer groups was not limited to BDC's but extended to to post spin off companies: including ACSF, FSAM, ARES, MDLY.
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.
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.
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.
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.
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.
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.
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.
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?.
Discounts to NAV: ACAS 31.9% to $20.54 reported NAV, 24.7% to $18.59 NAV diluted by exercise of stock options, AGNC 16.3%, ACSF 18.5%. Is restructuring the equivalent of rearranging the deck chairs on the Titanic?. Does ACAS need an activist investor who could kick their butts into stock buybacks? Does anyone know Carl Icahn's phone number?
I am not doing anything about the value of the NAV per share and you are free to do ignore all outstanding options. But there are those in the market place that will not agree with you and they vote with their money.
If you could find a company with net worth of $1 million with 100,000 shares outstanding you would value the NAV at $10 per share. This despite the fact that there are 100 million option shares outstanding with an exercise price of a penny per share. .
Per Yahoo schedule of dates for earnings releases.
You shouldn't try to convince me. Go after the analysts and professionals who are writing about this and reflecting it in the market place. For example, google seeking alpha then ACAS. The Jaded Consumer Nov. 6th 2014 values ACAS at 18.22 after allowing for stock option dilution.
I respectively disagree with you. Footnote 5 to the 2013 Form 10-K shown 54.1 million options outstanding at a weighted average price of $9.13 per share (with the highest at $13.68)..
All these options are in the money at an average appreciation of about $5 per share.for a potential dilution of about $270 million. If the stock were to appreciate to about $16 per share that would bring the total dilution in NAV to about $380 million or about $1.50 per share..
Granted, at that time (year-end 2013) only about 50% (26.7 million shares) were vested. However, as we have seen recent cut-backs resulted in employees becoming vested. I assume that nearly all of these shares will become vested and be exercised.
What am I, the Jaded Consumer and other analysts missing?.
Won't most these options be exercised and result in a dilution in NAV? Suppose the options outstanding were one billion at an exercise price of 1 cent per share. Would you continue to ignore the dilution?
For you non CPA's when earnings are debited for the estimated cost of option grants the offsetting credit is to Stockholders' Equity with zero effect to NAV. There is a reduction in that years earnings but no net effect on Stockholders' Equity. That reduction comes when the options are exercised.
The actual number of shares issued and outstanding Q3'14 was 269.9 million.
The shareholders' equity was $5.441 billion and the reported NAV per share was $20.54. Therefore the NAV per share was derived from the actual number of shares outstanding not an increased amount to compensate for dilution..