Simon Property Group: Time to Go Short

| About: Simon Property (SPG)

Simon Property Group’s (NYSE:SPG) decision to eliminate 90% of their cash dividend is the most vile of breaches between shareholder and management. They’ve used a small loophole that allows REITs to issue shares instead of cash and still retain their REIT status.

They claim it’s the prudent thing to do and reserve the right to “reinstate the cash dividend when it becomes less prudent.” What does that mean? When would one ever enter into a less prudent transaction? To add insult to their arrogance, they also claim that this is not in response to the current retail operating environment. On the conference call they also stated that their smaller tenants need them more than they need their tenants. Delusional is the word that comes to mind.

I for one, am thrilled. I’ve been short SPG for some time now. My carry cost just went down nine-fold. Additionally, whatever modicum of fear I’ve had about management being able to pull the rabbit out of the hat over the next 24 months has been completely eradicated.

I eagerly await their next testament to the high quality of their portfolio and their exceptionally strong balance sheet (so strong, in fact, that they’ve eliminated the dividend). Also, next quarter’s inevitable admission that they were somewhat surprised by the huge, “unforeseeable” number of retailer bankruptcies, the “unprecedented” downturn in consumer spending and the “astonishingly” rapid collapse in rental rates.

Hubris (/hjuːbrɪs/) or hybris (/'haɪbrɪs/) is a term used in modern English to indicate overweening pride, self-confidence, superciliousness, or arrogance, often resulting in fatal retribution.

DISCLOSURE: The author is short SPG common stock