I have better than an estimate. This is in the press release, as well as SEC filings.
Record date for spinoff is October 27 and the distribution of new stock is November 6. Between Oct 27 and November 6 is when the FMV is determined. Three markets will exist:
1. SNR WI: SNR "when issued". Basically SNR only.
2. NCT WI: NCT when issued; NCT only
3. NCT: This will still trade with rights to both companies
The record date of October 27 is misleading in the sense that NCT will still trade with rights to both companies through November 6. November 7 will be the first date in which NCT and SNR trade as seperate companies. The "when issued" stock symbols will be used to determine FMV of the individual companies. You can buy SNR alone via SNR-WI, but the pps may be a little volatile at first since the "market" does not relly know how well it will perform.
At any time in the window, the price of SNR-WI + NCT-WI should equal that of NCT. If not, and this happens frequently, traders will play it. Be careful about playing this.
Post 2-1 reverse split, NCT-WI is worth between $6 to $8. And SNR-WI is worth between $18 and $22. (You get the $6 for NCT-WI by liquidating everything now. That is the low end.)
"Cannot always trust Car Ichan who has his own agenda"
I would have ommitted the "always." If a guy like Ichan tells you t buy something, it's becasue he already bought it. If he tells you to sell it, he eigher already sold or wants to buy it at a lower price. Either way, he is not speaking in one of these "interviews" for nothing. He has an agenda -- and what is good for him is probably not good for you. :-)
To some extent this may be part of the reason -- improve ressults at FSC and FSFR. AUM for FSAM grew a considerable amount over the past few years, but at what expense to FCS and now FSFR? They have been selling shares of FSC every chance they could; the result is that we saw the pps fall from over $13 to $12 to $11 to $10 and now to $9. But FSAM never had a problem with selling more and more stock. And what they did in the last offering of FSFR was criminal -- a SPO that trippled the number of shares at 15% below NAV! Then announce an IPO of FSAM and boast about how fees from AUM were growing 70% or more year-over-year.
No doubt they would have a very difficult time doing another SPO anytime soon. And until they can show shareholders something, another SPO would kill investor sentiment. And without fee-income growth, the value of FSAM would not be worth much.
Another reason may be the market volatility. If the IPO were done on a bad day, proceeds may be 10-20% less than what Leonard was to get. Leonard is already taking $50 million or more per year in dividends from FSAM. I think he can afford to wait to cash out. (The $50 million may not be accurate, but it's probably close to that.)
Looks like FIG just acquired a portfolio of golf courses and country clubs for $307 million. The golf courses are all in sunny Arizona. I don't know if they will turn around and sell some or all of them over time to NCT as it liquidates or recovers money from the CDOs. But reading the tea leaves says this is the direction for NCT.
A stock buyback at these prices is equilivant to a non-leveraged, risk free 14% investment.
Selling shares at these prices, even if it is only via DRIP, dilutes value and the cost of capital is very expensive -- 14%. It would be very, very difficult to borrow at those rates and many investments that generated a good risk/reward return. Bottom line is that it hurts the company's image. How can they justify selling share at 10% discount? That question will come up in the next CC.
I sincerely hope people vote "NO" this December in selling below NAV. Frankly, I cannot understand how that got approved last year or the year before...
BDC Buzz is using Seeking Alpha as a advertisement platform to get people to suscribe to his news letters or "premium" research papers on BDCs. By predicting the next earnings or reported NAV, he can then come back and say "see, I told you so." If he is wrong, then he'll publish an article explaining where he went wrong in his prediction, and possibly suggest that PSEC did something funny with the books to get things to look better.
What I find ironic is that he wants to stear people away from risk, yet he is long an ETF that is 2x leveraged in BDCs. I can see betting on one of those for a short-term flip, but I would not want to hold something like that for more than a few days.
I also think that he is making too much of the fact that PSEC did not turn off its DRIP. The stock price is trading 10% below NAV and I do think that PSEC should shut that off if the pps remains in this range. I email and also spoke with IR at PSEC and discussed this. Specifically, I mentioned that they should use their buyback plan to repurchase the ones they sold below NAV. PSEC should be working on building a better shareholder frendly image. They have been relatively active in giving investor presentations for exactly that reason. But selling stock below NAV will paint a very different picture -- one where the management is interested only in AUM at any cost. Analyst's will ask about selling below NAV. They have plenty of time between now and the earning call. I hope they do the right thing.
The December I truely hope that shareholders vote NO to selling below NAV.
Back then you could park your cash in a CD and collect over 5%. The world has changed. You cannot compare today's USA to the USA of 1950 or 1960. In term of today's interest rates, this may be the new normal. If that is true, who in their right mind would park money in the bank for many years? Doing so guarantees that you lose 2% or more buying power every year. Small wonder so many people are buying stocks or below investment-grade bonds. Inflation is not going to skyrocket anytime soon. Even after the markets have been flooded with funny money by almost every central bank, deflation is a bigger risk than inflation.
What the Fed has been doing is supplementing our economy with money that was lost over the years due to exporting jobs. Printing more money may have stopped for now, but interest rates won't be rising. The next round of FOMC members is going to be more dovish than the one we have today. That should tell you something.
How did we get here is simple: Third-world countries started to flood the market with cheep labor. That was true before 1980, but it accelerated since then. Disparities in the standards of living will shifted toward equilibrium -- i.e. more jobs went to China, India or other parts of Asia. Economies such as China are so large now that our economies are linked together. "Our" economy now has an extra 3 billion people (India, China, etc.). The standard of living in China and India (large cities) has improved so much that they alone will soon produce 1/2 of all college graduates. Eventually, they will be consumers just like you and I. But we are still many years away from having equal standards of living.
Currently exports from China to the US far exceed imports into China. It took 20 years to go from balanced trade (pre-1985) to a trade deficit of over 300 billion. This seems to have reached its peek and the trade deficit has been flat for three years. But it will take many years to get back to a balanced trade.
Did you listen to the Web conference they had on Friday? First the CDOs: They could easily liquidate them now for $100 or $150 million, but they think they will recover $300 to $400 within two years. They may distribute the money to shareholders, or they may invest it. Apparently they did not have any investing plans in the short-term. Second, the golf course is still in testing mode. They want prove that the model is profitable before they invest on a larger scale. We'd probably have to give this 2-3 quarters
Yes, this will have some tax consequences. Other REITs or mREITs did similar spinoffs include TWO and STWD.
I crunched some numbers using some reasonable estimates of FMV to decide whether it is better to hold or sell and buy SNR when it trades.
SNR's equity plus cash is $819 - $43 = $776 million. Which gives about $5.84. Using $12.50 pps pre-spin, then post-spin FMV of $8.50 for SNR and $4.00 for NCT is reasonable. This gives $8.50 - $5.84 = $2.66 long-term capital gains that will be taxable, and my cost basis in NCT is lowered by the $5.84.
My current NCT cost basis is $5.00, but that will drop by maybe 25 cents due to the NEWM spin off earier this year. The net effect of lowering this by an additional $5.84 mean I'll have another $1.10 in long-term capital gains. Total long-term capital gains is about $3.76; at 15% tax rate, I pay $0.56 in taxes. And going forward, any ROC is long-term capital gains. Okay, that's not too painful. ON the plus side I own SNR and NCT, but of which will pay dividends. And SNR should see some pps appreciation over time.
I could sell all the NCT now at $12.20 and buy SNR when it starts to trade. But if I did that, I'd have long-term capital gains of $12.20 - $4.75 = $7.45. At 15% my bill would be $1.12. That leaves me with only $11.08 to buy SNR and I give up owning NCT. I don't know if I'll be able to buy SNR at $8.50 and I'd likely have to pay at least $9.00. If I thought NCT had noting but junk, that may be the way to go. But if we are going to recover $300 to $400 million from the CDOs, then NCT is worth $2.25 to $3.00. Further, the golf course may work out. (WES admits that this is a "remains to be seen yet." But so far things appear to be on track.)
Bottom line: If I sold now, I'd be giving up $4.00 to buy maybe 0.2 extra shares of SNR. I think I'll hold what I have.
I was a little worried about taxable income of $6. Yep: I did something wrong.
$786/133 = $5.90 per share is the equity in SNR before the spin off. As mreitcmbs says, the capital gains depends on what SNR trades at during the "when issued" period.
My cost basis in NCT, not counting the effect of the NEWM spinoff, is currently about $5. Post spinoff, that will drop based on FMV of the two companies. If it is $8.50 for SNR and $4.00 for NCT, then post-spin, NCT's cost basis goes to about 1/3 that -- about $1.60. Cost basis in SNR would be $8.50.
Now there's the taxes from capital gains: $8.50 - 6.00 = 2.50 taxable income,and $6.00 per share ROC. Dang: My cost basis in NCT is only $1.60, so another $4.40 long-term capital gains to me. Since I've owned NCT for over a year, this is all taxed at long-term capital gains. My tax bill: $6.90 * 0.15 = $1.03.
Going forward, any future dividends in NCT will be treated as long-term capital gains. If I sold all my NCT, I'd be looking at $12.50 - $5.00 = $7.50 in long-term capital gains. Further, I'd lose out on future pps gains in the SNR. (I could buy SNR when it trades, but I'd likely have to pay more.)
Crunching the numbers tell me to stay put. Too bad I cannot buy more now and average all the costs like it was a mutual fund. :-)
There are still a number of good CEFs out there that are trading at at 10% discount to NAV. Likewise for some BDCs. PSEC at 10% discount is still a good entry. Maybe keep the position small so as to not worrry as much?
Some of those blogs are written with the intent to manipulate you into buying or selling. The market was in near panic mode the other day. Some events seemed to unfold at just the right time -- market headed to full correction mode and the scare of ebolia. Some mutual funds may hav been forced to sell assets to cover redemptions. That's exactly when the money steps in and buys at the lows. Then comes to blogs to get you to buy -- so some funds can sell and make a quick buck. Once they are sitting on cash, they want the cycle to repeat. It makes me wonder if large banks are part of the "game." Several banks reported huge earnings becasue their trading desks were doing well -- very well.
I'm not saying that Seeking Alpha authors are employed by funds, but there are a few that I can think of who bash PSEC at just the right time. You never see these people publish their negative articles on the back of good news. Why is that? Others publish stuff with predictions or stock picks, but they also have articles that you have to pay for. These people are using Seeking Alpha as a platform for advertisement.
Regan said it best: Trust but verify. Did you verify the "facts"? Were the facts the full story, or only half truths? (One author with a picture of a pig on his profile tells half truths. He intentially leaves out other parts that negate his argment.)
I don't think we'll see this much below $9 soon. But hey, if the market beats the drums loud enough again... When that happens, it's tough to hold, and it's tougher to add to some positions. I try to focus on other things. Watching daily market moves like last week is not good for my health. I clear my mind of media trash and try to keep calm. I've done my research, I'm diversified, and I know that I'll be okay in the long run. That's what it's really about. Not the quick 10% trades. Nobody can do that consistently. Nobody!
Good luck to you with your future investments.
That makes sense and that surely explains where the taxable income from the NRZ came from. Hopefully the FMV of New Senior does not run up to much during the when issued period. NCT's presentation gave projections based on yields relative to similar equity REITs.
Senior Housing portfolio has $786 in equity -- $576 million of invested equity and $210 million of investable cash. (The $576 equity is after the $43 million security deposit is returned.) Based on 133 million shares, this gives BV of $4.33. Page 20 or the presentation says SNR share price could be between $10 and $11. This would mean taxes of about $6 per share. That sounds way too high to me. I much be mising something. Maybe BV is higher for some other reason? Is it posible that we create value out of thin air by simply putting these assets into a seperate REIT and we have instant capital gains becasue of the higher pps?
I'd have to go back to the presentations prior to the NRZ spinoff to see how those compare to what we actually had to pay in taxes.
30 cents: The dividends paid in Oct were for those shares you owned as of September's record date. They should not have to mention that (nothing personal).
Dividend reinvestment plan. Are they supposed to shut that off? They have a stock-buyback plan in place and if they used it, they could buy those back at more thjan 50 cents less.
Back in 2011 the pps fell below $8. In the next earnings CC they were asked about a stock buy back; their reply was that they did not have a plan in place. They then authorized such a plan to lead investors to believe that they'd use it if the pps fell well below NAV. We'll find out in a few weeks. At mininum, they should buy all of these back. If they don't then there's nothing left to say about their priorities. (I discussed this in some detail with IR today -- hours before I saw this post. I did the say yesterday with FSC.)
I'll be watching the next earnings call for this and other BDCs. Of the ones that are still trading at siginificant discount to NAV, we'll find out which one at least thought about shareholders. It's been a tough year: Removal from Russel and S&P indexes, SEC investigation (PSEC) and now market volatility -- and potentially more to come. The asset managers make plenty of money, and I think they can and should buy back some stock.
I don't know about going lower in the days to come, but that was a nice flip.
This was a flash crash and clearly illustrates what pannic selling, stop losses and shorting can do. My guess is that a lot of stop losses were triggered -- possibly at $9.00.
It's still trading at over 1.4x NAV. If there is a correction, it's becasue prices got too high. Bull markets tend to create bubbles like that. I like MAIN, but I'll wait. Today's bounce may be nothing more than a head fake.
Greenspan's comment during a televised speech on December 5, 1996 sums it up:
"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"
The IPO is for the asset manager. Basically, Leonard and his partner are cashing that in for a large one-time payment. They were collecting something like $100 million per year in fees. The year-over-year growth in FSC was large over the past few years due to many offerings. That growth will slow now -- expecially when it's trading below NAV and the management cannot sell stock below NAV.
It won't mean much to FSC and Leonard will remain as CEO. FSC has always been externally managed; the IPO simply means it has new owners.
Frankly, I don't think the IPO will get anywhere near as much as it could if the market went into full correction mode. The growth in asset management fees is highly correlated to the PPS of things such as FSC, which it manages. If the pps remains below NAV, they cannot issue new stock -- and AUM remains flat. The "market' will be much more careful about paying a premium to NAV now, and this is even more true after it looks at the recent SPO Leonard did with FSFR. (You can bet that FSFR's next shareholder meeting will vote "NO" to selling below NAV. If they don't, they're stupid.)
"Pimco and Bill Gross are synonymous" is exactly the image that PIMCO wants to get rid of. PIMCO has $2 trillion in assets, over 2400 employees and over 730 investment professionals. (Per their Web site.) It has a lot of funds that actually performed very well and still are. In my case, I hold only PTY, PFN and PCI. I did especially well with PTY and I want that to continue to do well.
Given that PIMCO's Web site has updated its CEFs with new managers, I anticipate a news release soon to remove some investor uncertainty. It could be as early as tomorrow before the market opens. I'm very comfortable with the management reorganization.