Prospect Capital (PSEC), a business development company, has filed to spin off three of its businesses into separate publicly-traded companies. It is in the middle of the regulatory process now, but hopes to complete all three in 2015 says Grier Eliasek, Prospect’s president.
Eliasek hopes the spin-offs, which will become pure-plays in their respective sectors, will command higher multiples on their own than they do as part of Prospect’s more diversified BDC structure. The BDC sector, which has been out of favor with investors for a while, has tumbled in recent weeks as interest rates have risen. BDCs are publicly-traded investment companies that mostly make loans to middle market companies.
Prospect’s businesses are broader than that and Eliasek believes at least three of the business lines will be better able to grow if spun out and, for a few, that also removes regulatory limits on how big they can become as part of the diversified BDC structure.
The three business segments to be spun off are structured credit (it would become a closed-end fund), online lending (it would take on a corporate structure), and real estate (it would become a real estate investment trust).
Prospect would essentially sell the assets to the new public companies and then would reinvest the cash in its current businesses. Existing shareholders would receive rights to purchase shares of the new companies.
Wunderlich Securities analyst Merrill Ross gave Prospect a valuation of $13 a share based on a sum-of-the-parts analysis after it announced plans for the spin-offs last November. But her current price target is $11.50. She rates the shares a Buy. Prospect is now trading at around $8 a share and has a yield of 12%
This latest run in crude and subsequent increase in LNCO has to be driving the shorts nuts. I haven't seen much covering and the 10 day average volume is 16% less than the 90 day average. The short position also increased in March over February. If this crude rally has any legs, there has to be some covering in the next 30-60 days.
Oil was up only slightly today, it was up 6% yesterday. This was something else.
Interesting none the less and I will certainly take it.
Did anyone hear some news?
Thanks. I have owned CIM for many years and believe this is a well run company. This is going to be a cornerstone of my retirement income.
They are looking for institutional buyers. Many funds cannot own stocks that trade below a certain dollar figure, $10 or $5 for instance. CIM also had a very large float, for a company their size, 1B shares, which is now 200M. By reducing the float, and raising the share price, they will attract more institutional ownership and reduce volatility. They also took this opportunity to raise the Div which signaled strength and an improving balance sheet. Since this was not done to save a, NYSE listing or as a last ditch effort to show strength, it is being viewed from a position of strength, not weakness, and therefore positive. (the last part is my opinion, but I believe is correct)