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Based in Vero Beach, FL, Orchid Island Capital (NYSEMKT:ORC) scheduled a $36 million IPO with a market capitalization of $50 million at a price range mid-point of $15 for Thursday, February 14, 2013.

Five IPOs are scheduled for the week of February 11. The full IPO calendar is available here.

S-11A filed February 4, 2013.

Summary
ORC is a mortgage REIT. ORC postponed a bigger IPO planned for July 22, 2012, discussed here.

The sponsor is Bimini, which has considerable problems of its own, see below.

Valuation
ORC wants to IPO at one times book value. Recent and fairly recent mortgage REITs IPO'ed at 1x book and they all sold off the first day.

Recommendation
Pass on the ORC IPO.

Business
ORC was formed by Bimini in August 2010 and commenced operations on November 24, 2010. Bimini has managed ORC's portfolio since inception by utilizing the same investment strategy that ORC expects its Manager, an investment advisor registered with the Securities and Exchange Commission, and its experienced RMBS investment team to continue to employ after completion of this offering.

As of September 30, 2012, ORC's Agency RMBS portfolio had a fair value of $66.8 million and was comprised of 89.3% pass-through Agency RMBS and 10.7% structured Agency RMBS. Net asset value as of September 30, 2012 was approximately $15.0 million.

Observations
ORC makes a big deal of terminating its relationship with Bimini throughout the SEC filing and hiring another 'Manager.'

However, Bimini, as the "sole stockholder of our Manager, will indirectly receive the management fees earned by the Manager through reimbursement payments under the overhead sharing agreement and the Manager's payment of dividends to Bimini." S-1

So the new 'Manager' is in reality Bimini.

About Bimini
Bimini is a mortgage REIT that has operated since 2003 and had approximately $125.7 million of pass-through Agency RMBS and structured Agency RMBS as of September 30, 2012.

In 2005, Bimini acquired Opteum Financial Services, LLC, or OFS, an originator of residential mortgages. At the time OFS was acquired, Bimini managed an Agency RMBS portfolio with a fair value of approximately $3.5 billion.

On November 5, 2007, Bimini was delisted by the NYSE. By December 31, 2009, OFS had an accumulated deficit of approximately $278 million.

Bimini and its subsidiaries are subject to a number of ongoing legal proceedings. An adverse judgment in any such proceedings could disrupt the alignment of interests between ORC and Bimini, should Bimini be required to dispose of ORC common stock to fund any such judgment.

Use of Proceeds
ORC expects to net $35 million from its IPO. Proceeds are allocated as follows:

50% to 70% in pass-through Agency RMBS.

Remaining 30% to 50% of the proceeds will be allocated to structured Agency RMBS.

Disclaimer: This IPO report is based on a reading and analysis of ORC's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Orchid Island Capital