RE:Nice company moveI beg to differ with you. Company raised 50M in April 2018 @16.60 and now raising $75M @14. 15. By company's own admission, share value has gone down by $2.45 or almost 20%.
Company divident yield is 2.8% and let us say interest on borrowing is 5%. So the saving is 2.2% if money is used to payment of loan. The cost of bought out deal is usually 6-8%. So 3 -4 years saving is alraedy gone.
If company is not earning more than the interest rate, then they are in wrong business.
CSIFail wrote: I don't follow this company too closely. It seems to me though that their debt interest rates are pretty high and tied to prime. Current around 4-5%. This finanacing is effectively at their current dividend rate (~2.8%). The company also has control over its dividend while it does not control the interest rate of its debt.
So it was a good move for the company to raise these funds if they use it to pay down debt. Their debt service cost will drop which should result in increased cash flow moving forward. It should result in a net EPS gain even with dilution. They can then use the increased cash flow in the future to buy back shares at their general discretion.
Long term seems like a good move to me. The market is too focused on short term here and there is now a huge over supply of shares. 5M shares vs. a daily avg of < 0.15M. It's going to take a while for the market to soak these up and shorts will beat on it with limited downside potential for them (4% loss to $14.15 at these levels).
They could also be firming up the balance sheet for a potential acquision.