ARMOUR Residential REIT, Inc. (ARR'>ARR), a real estate investment trust (:REIT) that invests in residential mortgage backed securities (RMBS), has recently announced a secondary offering of 9 million shares. The company has also decided to grant the underwriters an option to purchase an additional 1.35 million shares to cover any over-allotment.
Deutsche Bank Securities Inc., the U.S. investment banking and securities arm of Deutsche Bank AG (NYSE:DB - News), is acting as the sole book-running manager for the offering. ARMOUR Residential intends to utilize the proceeds from the share issuance to purchase additional financial assets in accordance with its investment objectives and strategies.
The equity offer is part of the Dividend Reinvestment and Share Purchase Plan of the company that would enable stockholders to automatically reinvest their dividends in the common stock, as well as purchase additional shares directly from the company from time to time.
The residential mortgage market in the U.S. has experienced defaults, credit losses and liquidity concerns in the recent past. These factors have impacted investor perception of the risk associated with the real estate related assets, including high-quality RMBS assets.
As a result, values for RMBS assets, including some agency securities and other AAA-rated RMBS assets, have experienced a certain amount of volatility. Increased volatility and deterioration in the broader residential mortgage and RMBS markets may adversely affect the performance of ARMOUR Residential in the future.
We currently have a Neutral rating on ARMOUR Residential, which presently has a Zacks #2 Rank indicating a short-term Buy rating.
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