This seems like it cries out for an activist. They have spent an amount equal to the entire market cap of the company in R&D over the past five years . . . with no sales increase. Key executives as well as the board are somewhat overpaid for a company of this size. Officers and directors don't own stock.
because they are subscale I think the discount will continue to be 15-30% even after cleanup . . . just don't have a path right now to grow the business without punishing existing shareholders with a below NAV offering, which I believe they have said they won't do . . hope they stick to it!
Yeah, I have been trying to wargame the potential for increases over the long term. I hate BDCs but if you told me book could settle out at $7 I would buy with both hands.
NAV today is $7.48 BUT there are still a couple of the bigger names with significant downside risk from legal, O&G etc. factors. I figure NAV settles out this year around $7.
What does the dividend look like long term then?
Say in two years with a stabilized portfolio of $11 in investments at 11% including fees and discounts you get to about $1.21 in gross income. Given the nano size and the fact that they have said they won't raise below NAV, you probably have about 6-8% of NAV in costs of operation, including interest expense, depending on how well they do on expense control (they are externally managed so I am not holding my breath). That would be a range of 42 cents to 56 cents for expenses. That gives you a stabilized NII of 65 to 80 cents. Obviously that is pretty good on a $5 share price.
Of course if the NAV settles out at $5.50 you end up with a dividend of 40 to 60 cents. Anybody see it differently?
I hate hate hate FSC and used to regularly post about the terrible management. But at 20% discount to NAV and a well covered 10% yield it is tempting.
it is either in the law or in the regs but below NAV stock issuance needs shareholder approval
pac, I agree, I think 20 cents would mean a significant stock decline but 25 cents or above would be viewed as sustainable and support a $9 share price, although depends in part on NAV of course
forever Goldstein and company have really turned into the gang that can't shoot straight . . . lately everything they touch turns to brass . .. they did well in 2010-13 investing in low risk undervalued CEFs but as those opportunities went away they have moved toward higher risk plays and they are not working out
That is like stealing, although they used to do converts at similar coupons so on a cash basis I guess the new babies aren't that much cheaper. Shows how bearish everyone is on the sector though.
I own MVCB too. The revolver is the only thing senior to MVCB and it is small relaive to the asset base so agree there is decent protection on those notes.
Owned MVC a long time ago. Considering re-entering the common. They did such a great job cleaning up the old meVC portfolio but their PE investments have been lackluster at best. I am hoping that the Tokarz strategy is to hold for eight to ten years like a PE firm would try to do because otherwise it is a real head scratcher why they aren't monetizing more investments.
This seems like a really bad time to be ramping up the mezz finance business which seems to the core of the current plan, though. They report in three weeks so I might hold off till then.