It seems like nothing can shake investor confidence in American Capital Agency Corp (AGNC). After a dividend reduction last month, shares ended higher the next day. If that wasn't surprising enough, Wednesday night, a quickly upsized, very large share offering was barely touching shares in the company. After announcing an offering of 54 million shares only minutes after the market closed, a news release from the company a few hours later gave a pretty strong signal into the demand in the market for this company's shares. American Capital Agency was able to price 62 million shares in the offering for estimated gross proceeds of $1.8 billion. Furthermore, the underwriters have an option to purchase another 9.15 million shares to cover any over- allotment. Proceeds of the offering, as always, will be used to acquire additional securities and for general corporate purposes. This is the latest offering by AGNC since it raised about $1 billion in late October last year.
Even though AGNC is increasing its share count by nearly a third (if the full over-allotment is exercised), shares were only down 2.4% after hours. In the past, I've advocated using the dips caused by the share offerings as a means to get into AGNC at a discount. However, after each successive offering the shares dip a little less than the time before, limiting the opportunity for investors to make a quick trade. It seems the demand for the yield on these shares is keeping the share price very strong, allowing AGNC to price ever bigger offerings at growing premiums to book value.
Given that AGNC continues to trade at a premium to book value, I can't advocate rushing to get in on this slight dip. Investors looking to enter into the name will likely see a better opportunity sometime in the next few weeks, as questions linger about Europe and rhetoric about Iran continues. For investors who have been in the name, the fact the offerings are so well received should provide comfort that the risks to the downside are limited. In the meantime, re-invest the dividends, and watch the best name in the mREIT space continue to grow.
Disclosure: I am long AGNC.