I doubt FSC will trade much above its NAV anytime soon. Last year they cut the dividend within one quarter of doing an offering. Recently, they announced a dividend increase, but immediately followed up by doing an offering. These were not shareholder-friendly actions, and I think they need to rebuild any "good standing" that they had with investors and analysts.
We need to see a few things here before FSC trades much above NAV. First, we need to see that they are earning the dividend. They would not have raised it if they were far off, and they certainly don't want to have to cut it. Second, we need to see continued improvements in the US economy. Like every other BDC, we don't want to worry about defaults. JMO.
As long as the dividend is safe and defaults are under control, I'm comfortable holding. (I've been holding for almost four years now. Albeit, I did have to buy/sell on a few occasions to get my cost basis down from over $12 to about $10.50. But most of that trading was done in 2011 just after the S&P downgrade.)
"How many snr stock will we get if we are holding NCT?"
Does it really matter? Immediately after the spin and split, the total dollars will equal what you have before the spin and split. And unlike the spinoff of NRZ which has a lot of MSRs, this spinoff may not be taxable. NCT has owned real estate for a number of years. If it is not taxable, then the only affect you see is a cost-basis adjustment.
The next earnings CC is just around the corner. We'll get a better idea directly from the hourse's mouth then. Personally, I think there is a chance that NCT decides to liquidate its CDOs over time and accumulate senior housing with the proceeds; that was the initial and preferred plan. The spin off was plan-B.
RSO "will retain the subordinated notes and the preferred shares in the transaction, which is expected to close on or about July 30, subject to the satisfaction of customary closing conditions..."
RSO's skin in the game is $354 - $235 = $119 million. RSO's effective yield depends on the spread of the underlying mortgages. If the spread is 5%, then counting mgmt fees, RSO will get about 15% on its $119 million investment.
I already own my limit, but I would have preferred that they waited for a better price. There is no reason for NAV to have changed much. Obviously the "market" is not willing to pay the 5-8% premium, and like FSC, they need to keep leverage within target ranges, so here we are doing an offering at 2-3% above NAV. Selling 13.5 million won't be a problem and I seriously doubt a price of $16.90 would last long. (ARCC has something like $1 undistributed income; their dividend is no no way shape or form at risk of being cut.)
There are plenty of positive things about ARCC. The one negative is that they recemtly IPO'd the asset management business; that may put some pressure on them to do more offerings like this. The asset management business has several new owners and to increase eps, they need more AUM. This is the first one since the IPO, but that is worth watching. If they don't look out for ARCC shareholders, nobody will pay much of a premium over NAV.
I had received fractional shares before the spit (from DRIP), and I got fractional shares of both NRF and NSAM after the spilt. These are through Sharebuilder. (This is not my first spinoff and fractional shares should have been distributed as cash for others. That never happened.).
Sorry to hear about the Ameritrade thing. It sounds like it more trouble than it's worth to call them and explain the missing cash for the fractional shares. A buck is a buck, but now you gotta explain things to more than one person... (if it is worth you time...) :-(
Underwriters "probably figure they will still come out fine if they hold".
Did you notice the volume on Friday? Underwriters were selling, make no mistake about that. (Technically, they were shorting it because the stock they got Thursday evening did not settle. But that makes no difference to you or I.)
Note that underwrites get the 8.5 cent dividend; they bought Thursday evening. There may be some additional fees as well. Unfortunately, with the exception of FSC's 2008 IPO, they have not reported the net proceeds from any common offering. (Don't bother comparing the fees associated with the IPO to a secondary stock offering; they are way too different.) For now, we'll have to trust that FSC did not sell below NAV. (Law suits would follow if they did; they are not authorized to do that.)
Underwriters (an investment bank) are very good a pricing offerings, especially subsequent secondary public offerings since these have trading history. The agreed upon price of $9.95 is a little misleading but that is the net gross per share that FSC will get. It's misleading in two ways: First, underwriters got the 8.5 cent dividend. Second, underwriters usually get an additional 1.5 to 2.5% discount. Assume the discount and other fees add up to 20 cents. The net to FSC would then be 9.95 - 0.085 - 0.20 = 9.665.
We won't know the "discount" until FSC releases that information, but we can get a good idea by looking on their Web site and seeing what the discount was for the past public offerings. I did not look to see what previous discounts were, but 2% would be a very good estimate. (You may have to dig deep into the 10K to find the net proceeds from the 26 Sept 2013 offering.)
FSC is NOT authorized to sell below NAV -- period. This was voted on by shareholders in the yearly proxy voting. FSC cannot breach this agreement. This tells us that the current NAV is close to $9.70 -- after any marked-to-market adjustments, and after the 8.5 cent dividend is taken off the cash balance. (Numbers reported at the end of June may include the 8.5 cent dividend since it was in the cash bucket at that time; so they may report NAV closer to $9.78.)
FYI: Technically underwriters were shorting the stock today. FSC issued then the 13.2 million allotment Thursday evening, but those have not yet settled. So technically, underwriters do not have the stock to sell, but because they will have it in a few days, they are shorting. (Someone said underwriters were not selling. Technically they were shorting it. The net effect is that it makes no difference.)
The executive had no business giving confidential information; he should be terminated, and the company might follow with legal action against him/her. McPhail may or may not be guilty of wrong doing; that would depend on other circumstances. The SEC did not discover this by cross checking databases; someone blew the whistle. Lesson learnt: Keep quiet!
I agree that this is small-time stuff. If the SEC wants to send a message, I don't think this will resolve anything. Making this public only ensures that people are more careful about talking, email, texting, etc. about this stuff.
The SEC can get a few "big boys" -- but these are people who burnt bridges and lost friends. (Steve Cohen of SAC Capital Advisors is in this category.) However, the bigger problem is when insider trading occurs within politically powerful groups.
Here are some interesting facts:
1) Did you know that after a after a 60 Minutes exposé, Congress enacted a law against insider trading by Congress itself? The idea was mandate online disclusure of congressional stock trades to allow monitoring. A year later, Congress watered down the "Stop Trading on Congressional Knowledge Act " such that enforcement is questionable.
2) The real kicker is that current insider trading laws do not apply to nonpublic information about current or upcoming congressional activity. Yep, a member of Congress attends hearings and confidential meetings with business interests, and is aware of new legislation... And it is perfectly legal for him/her to go out and buy stock in a company that is affected by new laws or contracts. He or she is free to buy that stock ahead of the bill's public introduction or the apporval of contracts.
3) People in Congress are paid a salary if slightly less than $200,000 per year. Yet 47% of the members of Congress are millionaires. Hmmm.
4) What about friends of Congress? Let's just say that after leaving office, over 40% take lobbying jobs that pay over $2 million per year.
Agreed about dividend sustainability: Last year they did an offering then cut the dividend within two or three months. The took a lot of heat from analysts about that, and it's a good bet that they don't need to repeat that mistake. (Ratings would drop and it would hurt future capital raises and eventually their credit rating.) A dividend cut in 3-6 months is not going to happen. Period.
Underwriters bought the stock last night at $9.95. Forget the volume you see today -- that's mostly underwriters reselling... and they won't sell for a loss. Getting this for $9.50 today would mean someone just lost his/her job. LOL
To the cry babies on this board: Rather than cry about a pps drop, why not take advantage of it? I've held FSC since 2010 and I've bought/sold shares during offerings and the 2011 "S&P downgrade crisis". I've lowered my cost basis from over $12 to $10.50 -- all via wash sales!! FSC is a strong hold for me, but I am tempted to get a little more at $9.70 becasue I know we will see $10 soon enough. Just my opinion/advise.
Offering price is $9.95. Deduct the 8.5 cent dividend (underwriters bought last night) and discounts and fees... The net to FSC is maybe a penny or two or three abouce NAV. I would not freak out over this.
The price you see in pre-market may not reflect the price of the offering. Underwriters already agreed on a price last night. FSC is not authorized to sell below NAV.
They made a good amount of investments using leverage up and needed to raise cash. They announced a dividend increase last week and intended to take advantage of the price increase for the offering. Based on today's closing price, I anticipate the offering price will be $9.90. When you subtract other fees and broker discounts, that nets them maybe $9.80. This would put the offering at the same price as NAV: "Net asset value per share was $9.81 as of March 31, 2014, as compared to $9.85 as December 31, 2013."
You can argue that management is looking out after their interests first (i.e. AUM). Unfortunately, it's also true that if they borrow to their limit and don't raise cash, then they will lose business.
I would not worry about this too much. The recent dividend increase is not likely to be cut in three months; nobody raises it only to turn around and cut it -- especially when you consider that they had to cut it last year. There is no way that they want to have to cut it again in 3-6 months. That said, the pps will bounce back. IMO: It's worth $10.
Very good news. Further, manangement would not have increased it if they did not see it as sustainable. :-)
Average cost basis is not the same as adjusted cost basis. Until NRF tells us the details, you can get a good estimate by using today's stock prices of $17 for NRF and $18 for NSAM.
For you first lot, you now own 1K shares of NRF at 30.96 * 17/35 = $15.03. And you own 1K shares of NSAM at 30.96 * 18/35 = $15.92. You then repeat this for each lot. (Future ROC may push some lots to zero which mean we pay long-term capital gains on additional ROC.)
This assumes that the spinoff is tax free -- which I think will be the case since both NRF and the asset management were both operational for over five years.
We will have to wait until NRF issues a statement on that. Even then, we will have to wait until the next 1099-div becasue some of the NSAM you get may be taxable and some (most) of it will be ROC. It's only the ROC that adjusts your NRF cost basis.
I've had a few spinoffs last year and according to posts on boards like this, almost every broker shows something different immediately after the spinoff. In the case of ShareBuilder, it usually takes 3-5 business days to get the spunoff stock in my account.
The 1099-DIV that we got were also inconsistent -- the cost-basis adjustment and any taxable income adjustments were completely wrong. (I had to call them several times before someone looked at it, and then I had to wait TWO weeks for the corrected 1099-div.) I was not alone and several people with different brokers had issues. At the end of the day, it's my responsibility... I have no doubt we will see this in Feb 2015. :-)
Did you read the Form N-2? It does not specify the number of shares stock, subscription rights, warrants, etc. It simply says that they can sell any combination of these, but that the total proceeds will not exceed $3 billion. (Not 3 million shares!!)
It's used by closed-end inventment companies to register securities. It's also supposed to provide investors with information that can help them make investment decissions. Once it becomes effective, the company can sell stock (or other things).
Yes, there will be another SPO, but I doubt it will be as soon as this week or next week. The stock has not fully recovered from the selling due to ALL BDCs from being excluded from S&P and Russel indices. Unless they are hard-up for cash (which I seriously doubt), they will wait for the price to be well enough above NAV such that any SPO will be accretive to NAV and future NII on a per share basis.
I would not worry about it.
Some SA authors are very good and publishing their research there is better than not having any publications. Further, some authors publish simply to help educate the "retail investor"; many of these people already have careers as accountants or analysts.
The same can be said of almost every blog, but I'd give the Seeking Alpha authors a lot more credibility than 99% of the posters on Yahoo message boards.
You can agree or disagree with any SA post, but these almost always support an argument with facts. It may be true that facts are skewed to present only one side of an argument, but I usually get something from these "devil's advocate" articles. If nothing else, they underline things that need to be looked into more carefully. On the other end of the spectrum is the "this is a great company" blogs; I really don't get much from those.
At the end of the day, it's up to me to dig deep into the facts and decide if something is a good investment. Getting full color on the important facts is not easy. Further, I don't have a team of accountants, lawyers and business specialists to help spell things out in plain English. SA articles, including comments and any rebuttals, can be a useful spring board for further research. JMHO
"It looks like they are paying out close to 100% of earnings. - That certainly does not leave much room for slip ups"
This is a REIT, right? Per IRS rules, they have to pay close to 100% of their taxable income as dividends to avoid paying corporate taxes. Don't compare this to a "regular dividend paying company" that retains 40-50% earnings. That's apples to oranges.
I'm not aware of any REIT that retains more than 5% of its earnings. That's the point -- they pay us the earnings and we pay taxes. That's far better, IMO, than paying double taxes.
How safe is this? That depends on many factors -- such as interest rates and loan/mortage defaults. I'm long here, but I would not put too much (percent wise) on this one stock or any one sector such as mREITs. From what I can see, things look good for several quarters -- which is about as far as anyone can predict. The safety also depends on you and how closely you keep up to date on what teh company is doing. JMO
I did not look at when their fiscal year ends, but we saw a special dividend in December as well. My two cents says that they would not have gifted us this unless dividends for the remainder of 2014 looked stable. This is actually something of a surprise considering the stock offering at the begining of the quarter. They must have sold something for capital gains. We'll get those details in the next CC. For now, enjoy the dividends. :-)