I observed the method needed to preserve NOL's in a prior situation. It has to do with how the change of control is structured but it is quite doable.
Excellent reply. I saw the situation with an externally managed REIT blow up in shareholders faces previously. There is too much of a carrot for the external managers to fulfill their fiduciary duty to shareholders and they opt to fill their own pockets.
It seems, of course, as always--that we must simply TRUST ACSF/ACAS to be good guardians of our shareholder value. Perhaps FSC/FSFR have a bit of a shady history and track record in that regard that both ACSF and ACAS have no intention of duplicating???
Here is an incisive post about FSFR/FSC:
"Shares may trade higher due to FSFR's higher than average dividend yield for a senior floating rate BDC, but when next quarters results are official, and investors realize they won't be earning that dividend, reality will sink in and this thing will be priced along with other BDC's that aren't earning their dividend.
I don't think it's just a coincidence that FSC & FSFR both raised their dividend beyond what their portfolios are earning in an attempt to make their secondaries more attractive to investors.
The Fifth Street franchise has proven to be a wealth destroyer for shareholders, although it's a real money maker for the external manager.
FSC IPO'd in June 2008 $ $14.12. NAV was $13.02 at IPO.
Today FSC's share price trades 31% lower than the IPO price and NAV is 25% less.
FSFR IPO'd a mere 13 months ago at $15.00 and already is trading 17% lower than it's IPO price, and now with this highly dilutive secondary, has managed to destroy NAV per share by over 15%.
With so many BDC's where management operates in their shareholders best interest, I don't see any reason to consider the Fifth Street BDC's."
After Blank's post I looked at the FSFR situation. It's interesting that they indicate that they had the support of ISS (?) the shareholder advocacy group that opines on proxy vote issues and one other group for their pending massive share offering at FSFR. I did not read deeply enough to understand why FSFR felt they needed to do such a big, dilutive offering. The bit I read said they were to use proceeds to repay debt and use for corporate purposes and to make some further investments. Nothing seemed too urgent, NMB, It does cause on to worry that ASCF might like to do the same thing at some point in the future. It is in FSFR's best interest to increase AUM to earn a higher management fee, and shareholders must be concerned about dilution. ACSF has the same interest at heart. One wonders how FSFR got the approval of existing shareholder to do the share offering. ACSF share owners would have a say on such matters, and one would think they would certainly vote down such a proposal. From ACAS's standpoint, increased AUM at ACSF would bring in more $, so it is not as if ACSF is free from influence from ACAS either.
What rationale did management give for its need to dilute previous shareholders with the share offering at FSFR?
I looked on the KMP and the KMI websites for the information/presentation you posted and I do not see it. Can you point me specifically to where this is on the KMP or KMI website?
One would think that as long as current KMP unitholders convert to shares of KMI and ALSO opt to take the $10.77 in KMI stock and NOT cash that any taxes due would be deferred as it is in almost all other stock based mergers/acquisitions. Why is this transaction different?
Regardless of the fact that the new KMI will not be an MLP, the historical benefit already accrued to existing KMP holders one would think would be preserved, HOWEVER, not in regard to dividends paid going forward once the new KMI is consummated. In other words, your new costs basis in KMI would reflect your old cost basis in KMP which you have been adjusting downward to reflect the non taxable portion of the MLP distributions you have received. And that old cost basis remains in place until such time as you sell you KMI shares (or pass them through to your relatives at a stepped up cost basis once you die) with the exception that your dividends received after the new KMI has absorbed all of the other entities will be treated regular taxable dividends and will no longer be non taxable and treated as a reduction to your cost basis.
This makes a lot of sense to me. Any rebuttals out there?
very nice .83 cent increase in NAV from the 1st quarter of 2014. It has been the steady increase in NAV for the past 5 years which has lifted the stock. Perhaps tomorrow will see the market appreciate this .83 cent increase in NAV?
Further, this is the MOST EXPLICIT I have ever seen CEO Malon Wilkus ever be in discussing the reorg plan. He explicitly states that ACAS is expecting to present the reorg plan to the Board of Directors in the 4th quarter of this year. That paragraph from Wilkus, along with the sure-to-come follow on analyst questions in tomorrow's earnings conference call about the reorg (now that Wilkus has set a 4th quarter expectation for it) may bring some increased interest in ACAS stock as well.
That said, the share price has been languishing lately and the market could just yawn as it has recently over the possibility of the reorg. Seems to me that the reorg is coming into focus much more clearly now that Malon has been so explicit about it in this quarterly earnings release, though.
As always, time will tell!
Yes the value of your options would reflect the potentially increased value of the ACAS underlying in a Spinco situation. Your option holdings would change do to the spin, but the value will remain and reflect the higher value of the combined ACAS/Spinco should the market deem the reorg action as value enhancing.
Hope that help you.
Was any part of you buying the options due to a belief that the coming ACAS earnings release will see ACAS surprise on earnings to the upside?
Also wondering whether you bought the additional options because you think there is a good chance ACAS will further and meaningfully delineate their reorg plan with the coming earnings release conference call.
Just wondering and pondering!
I'm surprised, too. Great news on the dividend has yet to be reflected in a higher stock price. It may yet come, though. Time will tell.
I left a new question for you at the ACSF message board under the subject title "2nd dividend will be on a full quarter of production, not 2/3's of the 1st Q of operation". My message does not (yet) show as being from today and at the top of the Topics listed for some reason. As such, you need to click on the topic "2nd dividend..." and look for my question which is in response to your post.
From your post above you are expecting ACSF to trade at a 6%-7% dividend yield looking at competitors. Which are the most comparable competitors in terms of portfolio composition?
A 6%-7% dividend yield on this meaty .28 cent quarterly dividend puts us at a range of $16-$18.66 with a midpoint of $17.23.
How soon do you think we can hit that range?
Have you boosted your target range from the mid $15's due to this .28 cent quarterly dividend announcement?
It may also be the case that the restructuring discussions/plans are far enough at this point that insiders may not be allowed further open market purchases as per company policy.
Any deal would have to be done in excess of NAV. Otherwise, shareholders would never agree to consumate a deal. That said, at this point in the market cycle it is open season for company buyouts.
I was thinking an outside party, perhaps Blackrock (BLK) given the hefty percentage of stock they already own. ACAS inside ownership is small and could not thwart a fair buyout offer. I think mid-$20's is doable and accretive for the right buyer.