I think you can be sure that there will never be a secondary public offering in the traditional sense. They have an active At The Market program running and are very pleased with how that is going and appear to use the ATM over the SPO route.
So ORC managed to raise roughly $20M via the ATM program IN THE LAST MONTH ALONE! That works out to 300K additional fee revenue going forward. It looks like they could easily exceed my $300M estimate for equity in ORC by year end. They said on the conference call that the ATM program was working great and that the real limit to growth wasn't raising the money, it was how much money they could effectively manage.
Great post. I'm not qualified to critique it but it sounds reasonable. Anyone else have an opinion? Denn7, any thoughts?
I'm also thinking that the eventual payment of dividends will be a catalyst for increasing the PPS. So we should look forward to the exhaustion of the NOL's as a good thing. Just my opinion.
Denn7 - I'm really ignorant of even the basics of reading financial statements and the consolidated reports for ORC and BMNM are way over my head. I spent an hour trying to figure out how you determined the BMNM specific portfolio sizes and couldn't. A little help would be appreciated. I'm certainly very happy to hear how fast it grew and see your point that the both the portfolio and the fee will drive the value going forward. On a related topic, any thoughts on the limits to growth of the portfolio's of either ORC or BMNM ? Obviously one tends to drive the other.
I agree that we can get some use out of comparing BMNM to ORC, but I believe that going forward that going forward the management fee, and the growth of that fee, is going to be the most important factor in valuing BMNM. My investment in BMNM is predicated on that thesis. I think we can count on ORC's equity be at least $300 million by year end. That means we go into 2016 with (at least) 4.5 million in fee revenue. At which point BMNM's revenue is more or less split between fee and interest revenue. I would consider that to be the pessimistic case, ORC grew equity by over 3x in 2014. Image if they could do that again this year.
Anyone know a good comparison stock for BMNM? I agree with mreitcmbs, the story with BMNM is the management fee. So there are problems comparing BMNM to ORC. I went looking for comparable companies but all I found were limited partnerships and large diversified services firms. I couldn't find anything remotely like BMNM (but I'm not really familiar with this market segment). The core questions are what yardsticks to use and how to use them. PE seems like the place to start but what's a reasonable valuation off of that? Also, I don't think we completely ignore BV, I see it as setting the floor under the SP. It would be nice to know that our investment would be very unlikely to go below 0.84
This explains it, from ORC's third quarter 10-Q. Note that it's a percentage of "equity":
The Company entered into a management agreement with Bimini, which provided for an initial term through December 31, 2011 with automatic one-year extension options. The agreement was extended under the option to December 31, 2013, but was terminated at the completion of the Company’s IPO on February 20, 2013. At the completion of the IPO, the Company entered into a management agreement with Bimini Advisors (the “Manager”), which provides for an initial term through February 20, 2016 with automatic one-year extensions and is subject to certain termination rights. Under the terms of the management agreement, Bimini Advisors is responsible for administering the business activities and day-to-day operations of the Company. Bimini Advisors receives a monthly management fee in the amount of:
One-twelfth of 1.5% of the first $250 million of the Company’s equity, as defined in the management agreement,
One-twelfth of 1.25% of the Company’s equity that is greater than $250 million and less than or equal to $500 million, and
One-twelfth of 1.00% of the Company’s equity that is greater than $500 million.
The Company is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf. In addition, Bimini Advisors began allocating to the Company its pro rata portion of certain overhead costs set forth in the management agreement commencing with the calendar quarter beginning July 1, 2014. Should the Company terminate the management agreement without cause, it shall pay to Bimini Advisors a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the initial term or automatic renewal term.
BMNM get's income from three sources: 1) Interest income from portfolio that is directly owned by BMNM 2) a pro-rated share of the interest income of the portfolio that is owned by ORC and 3) a management fee for managing ORC' portfolio. That management fee is calculated as a percentage of the size of ORC's holdings. The larger the holdings, the larger the fee. So fast growth of ORC's portfolio may not be good for investors in ORC but it's great for us BMNM investors. One caveat, I'm a know nothing cube dweller, don't assume everything I say is accurate.
I'm mean really, how does that make sense?
It's clearly a new program. The prior program authorized $75 Million, the new one is $100 million. I figured they would do this, the old program was just about exhausted. I'm very pleased, but then I'm long BMNM.
They aggressively grow the number of shares during 2014 via the ATM program. The volume of new shares issued during 2015 seems to have really dried up. They have come close to exhausting the authorized share offering under the ATM (roughly $69 million out of the authorized $75 million). I guessing that the share issuance slowed down in 2015 due to the fact the the PPS dropped to at or below book value for much of 2015. Anyone have an opinion on the possibly and/or timing of their doing a second ATM ? Personally, I'm in favor of it but then my financial interests are not aligned with folks invested in ORC.
Time for a rumor, many other websites have been pushing a rumor that apple might buy Telsa. Frankly, apple buying Htch makes at least as much sense. Grab control of revolutionary technology that would give them a competitive edge for OIS enabled smart phones, provide much needed capital to shore up the supply chain, yadda, yadda, yadda. Maybe if we say it enough some folks might start to believe it.