Be careful. As we all know, it can get cheaper. Much cheaper. I learned my lesson about margin in March '09. I was buying things on margin by the bucket loads in Jan-Feb and then got called out of two positions (DOW and PGF) on the final whoosh down in March, locking in a significant loss. I've made an absolute killing on the positions I was able to keep (especially EPD) so overall it worked out. But it still stings - knowing I was right about those securities but it just didn't matter. When the market gets irrational it will take you down with it.
For the same reason you don't sell your stock and hold cash. A penny saved is a penny earned. This buy back saves $1.3M per year. No way to park cash and get that kind of return. As to why the money was not used to pay debt, I am not sure what the terms of this company's debt instruments. are.
No, and that is the motive for a company like this to buy back the shares. To me the results say that Gross doesn't find other investments that are available in the market as compelling as buying SLRC stock at 7.25% yield. A dollar saved on paying the dividend is a dollar earned for shareholders. It's better than holding cash, that's for sure. But it's not a good sign for real growth, only "fake" EPS/DCF growth by making the denominator (share count) smaller. Not great news for SLRC holders, but I have to agree with Gross. I haven't bought anything in awhile - most stuff seems to be fully valued, and knowing that rates will be going up in the near future doesn't help matters for income investors. Holding treasury stock and keeping the dividends may not be a bad move here....but it isn't going to help short-term performance.
You may be surprised. Watch the volume on the open. I bet at least half of those 12M will trade on the open. It may take a few days to get the last few million, but I think buyers will come out of the woodwork for this one. I did.
Nice. The distributions are looking *much* safer now than they did two Qs ago, so exercising might be a good thing to do so you can start collecting them.
after factoring in the new acquisition. I think it was Hal who said that on the call. Wow, that is getting up in the range of the less risky midstream guys. Later he added that they were going keep taking a slow steady approach to increasing the distribution rather than take it up quickly to where the coverage goes back down to where it is now. That's terrific news.
No, dummy. That is how you lose money. BUY when everybody hates it. Sell when they love it. I sold some at 17, now buying it back in the 13s. My new basis is in the 8s, including divs. Stick around, you might learn something.
Nobody has asked if the debt would have been cheaper than paying the $.88 dividend. These guys pay high rates, and interest rates have gone up a lot this year. Perhaps enough that it would change the economics of a transaction. That would be a deciding factor, no? Anybody know the going rate for these secured loans right now? I haven't followed it.
"Back then there were more shares and twice the dividend. Not sure what has happened to the financials but they have a lot more planes now"
Back then, the shares were priced above book, and the company was able to sell shares to fund growth without dilution. The economic crash taught people that a spike in LIBOR can essentially make these companies insolvent overnight by breaking the debt covenants. So that risk is priced in, and in my view this has changed the business model. With shares priced below book, these companies must retain more of their cash flow to fund growth. So instead of 30% more shares with twice the dividend, we've been living in a regime with 30% fewer shares at half the dividend.
This latest secondary is a bit puzzling, but it does sound like they plan to buy more than what they originally had slated for this fiscal year. Reading between the lines, management has consistently stated that they are in the sale/leaseback market, not the market for new aircraft from the manufacturers. They also have been upfront about market conditions - i.e. they simply do not buy anything when the sale/leaseback market is not favorable for FLY. Clearly they see a window of opportunity right now because they have done a number of these deals recently, and from the CC it sounds like they have at least $200M more coming this year. In my view that is what pushed them to do the SPO. They know they couldn't issue debt because they got severely punished by the market last time they took debt/equity up over 3.5x. The other alternative was to miss the opportunity and therefore not grow. At that point it's a judgement on management's part to decide whether you are running the company for growth or for value. I think we have our answer.
My $13.85 order filled. I think that's enough punishment. I'd buy again in the low $13s.
It was the only loser I was still holding - bought in the 12's and just sold for a loss to counter some of my realized gains. Good luck to longs - I feel that renewed drilling efforts in North America is going to make an uphill climb for the tanker companies, compared to their "peak oil" glory days where all our hydrocarbons were coming from the middle east.
They don't have egg on their face to the people they are really serving - their hedge fund buddies that generate huge commissions for them. Free money for all of them today...buy at $14 and flip it for $14.5. And the underwriters get their $10M cut no matter what. We shareholders are holding the bag on this deal. Colm had better do something spectacular with this cash infusion, to make it worth all the pain.
Strange, but not mysterious. The MMs had to put their hedge on before they could create the shares (which they are then holding until they can sell them off).
I do think the company got played though. Here we are at $0.50 above the offering price and I doubt the company will see any of that bump. Free money for friends of the MMs who can just flip the stock at the market for a no-brainer 3.5% gain. Pretty shameful if you ask me.
In any case, it's quite obvious that Colm needed $150M and exactly $150M. When the price dipped to $14 from the originally announced $16, the share count went up to make the offering worth $150M again. All signs point to the fact that they have a specific deal waiting in the wings for this cash infusion.
My order is in at $13.85.
They are likely negotiating price now. Unfortunately the market makers are the ones doing the negotiating, so of course they know where to trade the stock way before we ever could. And yes, to mitigate their risk, they do put on a short position before buying the new shares (to then resell to clients via their trading desks). Bad news for a thin stock like FLY. Could be a buying opportunity but I would WAIT until *we* get to know the price because who knows what kind of gyrations we could have in store until the transaction is set to go off.
Did you know that the first four dividends this company paid were $0.50 each, back when the share price was in the $20s? Then they cut it to $0.20 near the bottom of the market in 2009.
Were lease rates that much better back then, or was the business model different? Now they are retaining cash flow and selling off older AC to fund the equity needed to make new purchases with secured debt. Perhaps at the IPO the plan was to sell equity and give more of the FCF to share holders. Will the market ever assign a value above book, so that management could justify doing a secondary?
LINE up today is probably a technical issue, not a fundamental one. Shorts are getting out of LINE, not wanting to hold their positions over the weekend.
My guess is that BBEP isn't (as) heavily shorted, so this technical issue doesn't apply here.
There is also the issue that LINE and LNCO have not been trading on par with each other. LNCO has been hugely outperforming, which makes no sense. So there could also be an arbitrage going on there, bringing LINE back up toward where LNCO has been trading.