One other positive from the CC - The looming Interest rate hikes will be a benefit to RSO.
Others on this board had laid out the argument that an Interest rate hike would actually benefit RSO but now management has also confirmed that this would be true.
CEO quote from the transcript:
"For instance when the interest rate sensitive stocks declined in anticipation of higher interest rates our stock tends to trade down with them. However we have very little interest rate sensitivity. Virtually our entire commercial real estate portfolio is floating rates. And we regularly securitized and that we are term financed. Northport's entire portfolio is floating rate as well. We've examined this and our analysis shows that increases in interest rates would actually serve to increase our ROE, net income and AFFO."
It will be great if they can get this substantially done before the next qtr ends. With the 25% volume limitation it would be impossible though. The most they could get done is 35-40 trading days or 50-60%
They are not claiming to be buying back DEBT. That is what you keep saying.
You should read or listen to the CC. It's very clear they said they are buying back STOCK. Not sure why you would misunderstand that.
CEO Quotes from the CC transcript:
“The company would have been aggressive buyers during the second quarter for its own account but because we were considering some of the things that I have outlined today, we were precluded from buying back our stock. No more, with the information we provided today we will be free to buyback our STOCK and we mean the company and several of our executives and the directors will be doing so.”
“AFFO or adjusted funds from operations were $0.15 but would have been $0.17 except for the impairment that we will discuss more a little later which I do not seek to dismiss.”
“We are large holders of the stock and completely share that frustration and are committed to do all we can. We will be buying back our STOCK, we will execute the reverse stock split, we will work to accelerate the improvements to ROE that we know are coming as our remaining order credits repay and we will evaluate strategic alternatives to maximize the value of Northport and we'll keep focused on maximizing shareholder return.”
Question asked by Richard Eckert - “I'm just thinking at current levels, the shares have languished for a while now. BUYING BACK SHARES has to be your highest ROE type of investment? “
Answer by Cohen: “And that’s why we are very committed to it.”
It's really surprising that management has not been eager to buyback as much stock as possible with the stock price so depressed. Maybe my math is wrong but it looks like AFFO could be increased 1.7 cents if they were able to buy back 50M at an avg price of $3.50. If current AFFO is at .17 (before the effect of the bad loan) then AFFO could be closer to .19 next qtr if everything went well. Shouldn't take more than 70 trading days to get it done.
And the lowered share count would also make it easier to increase future AFFO through their regular business. But why stop at 50M? Why not use the opportunity and add another 25M to the buyback? Just keep buying until the stock price is too high. Wouldn't that be terrible to have to stop the buyback because the price is too high?
Instead of complaining that the stock is not understood and way undervalued SIEZE the moment and use it to your advantage. Cooperman's message was how can you not act on this gift right now!!
Maybe someone smarter than me can correct me if I'm wrong on the AFFO math. Hopefully I'm not too far off the mark. GL