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Steven Bavaria
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Steven Bavaria writes about finance, economics and politics, drawing on his forty years experience in international banking, credit, investment, human resources/training, journalism and public service. Now retired from his "day job" on Wall Street, Bavaria lives mostly off his... More
  • Oxford Lane Capital Announces Rights Offering Over-Subscribed 14 comments
    Mar 4, 2014 4:05 PM | about stocks: OXLC

    Oxford Lane Capital's rights offering was over-subscribed and will result in the issuance of the full 4,021,373 additional shares that were initially planned, the company announced today. The subscription price of $17 per share looks particularly attractive given that the market price is up to $18.16 this afternoon as the market is closing. The 38 cent price rise today suggests the market is encouraged that the existing shareholder group (the only ones who were offered the non-transferable rights) was willing, on average, to increase its holdings of OXLC by 50% in order to exercise the rights (some of the bounce may be due to the overall market being up today as well, although OXLC, being mostly a credit-oriented investment does not always move in tandem with the equity markets).

    The ex-dividend date for OXLC's big 70-cent dividend (60-cent regular, 10-cent special) is March 13th. So we should expect some gyrations around the price before and after that date.

    But for now, I'm glad I exercised my OXLC rights, and I'm sure other OXLC owners must be too.

    Disclosure: I am long OXLC.

    Stocks: OXLC
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Comments (14)
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  • 598
    , contributor
    Comments (17) | Send Message
     
    Cha ching!
    4 Mar, 06:12 PM Reply Like
  • shourey
    , contributor
    Comments (122) | Send Message
     
    The question , when are the shares that I bought in the rights offering, going to show up in my account ?
    4 Mar, 08:56 PM Reply Like
  • akareality
    , contributor
    Comments (8) | Send Message
     
    Hi Steve, I appreciate your articles on OXLC. I exercised my rights and am very happy with the decision. Many thanks also for the copy of the income spreadsheet!
    8 Mar, 03:53 PM Reply Like
  • rgc7157
    , contributor
    Comments (2) | Send Message
     
    Steve, you the man!

     

    Thanks for this recommendation!

     

    Randall
    10 Mar, 07:29 PM Reply Like
  • Left Banker
    , contributor
    Comments (1995) | Send Message
     
    Hmmm. I'd be interested to hear your thoughts on this:

     

    http://bit.ly/Ofhp64

     

    No mention of offering price.
    10 Mar, 07:36 PM Reply Like
  • pipe dreams
    , contributor
    Comments (20) | Send Message
     
    Yes, I would be interested also..17.10 after hours
    10 Mar, 08:56 PM Reply Like
  • Steven Bavaria
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » I see the price is down around $17 in pre-market pricing on Yahoo Finance. Obviously all those new shares are going to be a drag on the price, at least in the short-term. The key to longer term success is what the company will do with all the new money it's raising. Hopefully invest it in additional assets that will support its current dividend level. If they don't expect to be able to do that, I can't see the point of raising all the new money.
    11 Mar, 08:38 AM Reply Like
  • Steven Bavaria
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » More info, and I feel a bit better now, knowing that the newly issued shares won't be underpricing the recent rights issue price. The company just announced minutes ago that it has underwritten the new issue at $17 per share. So the bankers who handled the recent rights issue must be confident that they can sell a further 2.8 million shares (on top of the 4 million just sold via the rights offering) at the same price of $17 dollars (since they - the banker/underwriters - are committed to that price). The announcement also says that OXLC expects to deliver the new shares on March 14. That is three days before the record date for the dividend (March 17), so the purchasers of the new shares will get the dividend (as will the rights exercisers.)

     

    Here is the announcement:

     

    http://bit.ly/1g4J6EG
    11 Mar, 09:34 AM Reply Like
  • Steven Bavaria
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » Market is open 15 minutes and there has been a volume of over 800,000 shares already. Price just crept back over 17. Must be a lot of different views out there on this stock. You'd have to be pretty pessimistic about the next few week's prospects to sell now and give up a 70 cent dividend, wouldn't you?
    11 Mar, 09:44 AM Reply Like
  • Left Banker
    , contributor
    Comments (1995) | Send Message
     
    Thank you Steven. This gets more intriguing by the hour. I'm holding my breath in anticipation of the announcement of current NAV, which will be interesting. I can only assume it will be something very close to $17.

     

    This one certainly is a different sort of ride.
    11 Mar, 09:55 AM Reply Like
  • Leo the Lion
    , contributor
    Comments (6) | Send Message
     
    Steve,

     

    Today OXLC priced an underwriting of its common for $17.00 per share, the same price as the rights offering. The stock therefore is currently trading around $17.00. Am I correct that because of this underwriting, the existing shareholders received no value from the rights offering? And is management of OXLC simply concerned with receiving greater management fees?

     

    Best regards,

     

    Leo
    11 Mar, 10:06 AM Reply Like
  • Steven Bavaria
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » Hi Leo -
    It appears the management and the underwriters discovered from the rights offering reception that there was indeed an appetite for the stock at $17 a share and decided to take advantage of it by issuing additional shares at that price, which they said in the rights offering announcement they had the option of doing. So yes, for now it certainly appears in retrospect there was no price advantage in buying in via the rights offering, since you could do so today and still own the same shares and (because we are still ahead of the ex-dividend date) receive the dividend later this month. So anyone who bought into the rights offering hoping for a quick sort of arbitrage gain (which, let's face it, was always on the back of all of our minds as a possibility) will be disappointed. As for those of us who are long term holders and saw the rights offering as an opportunity to acquire more for what seemed - at the time - as an attractive price, well, the jury is still out as to how this will all turn out. Depends a lot on what the price settles at after the ex-dividend date.

     

    I thought of avoiding the rights offering and just waiting to see what the price would be, but basically decided I didn't want to take the chance of feeling later like I'd missed out on something and wishing after the fact I had exercised. So we'll see how it all turns out......
    11 Mar, 11:01 AM Reply Like
  • Left Banker
    , contributor
    Comments (1995) | Send Message
     
    Seems there's a significant level of smart (or, shall I say presumably smarter-than-retail money ready to buy at $17. While it was certainly nice watching the price bounce around about $18 it was clear to me that this would not last for the short term. I fully expected the price to drop to near the offering level--it's the only outcome that really makes sense.

     

    For large institutional investors, buying this at $17 makes good sense. But, given its edgy liquidity, buying at an institutional scale on the open market can be difficult as large purchases drive the price up. My point being that there is a different appeal to the rights offering and public offering for institutions vis-a-vis individuals.

     

    I agree with Steven that we won't have a clear idea on this until after ex-dividend, after the dust settles a bit on the offerings, and, I'll add, after the declared NAV.

     

    At the moment, I'm comfortable with my position in OXLC and ok with having added more. Although I must admit that when I ask myself if I would have simply bought more at $17 in the normal course of events, I'd almost certainly have to answer "no."

     

    My primary objective in holding OXLC is income and I have no issues on that front. For me, the rights offering was an opportunity to look at some other income holdings and decide that they are not as attractive as OXLC so it was reasonable to swap them out at this time.

     

    I expect to be holding this on for some time to come, which is why I decided to not arbitrage half my position when there was that opportunity in the high $18s a week or so ago.
    11 Mar, 11:27 AM Reply Like
  • Steven Bavaria
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » Volume coming up on 12 noon is above a virtually unheard of (for OXLC) 1.4 million shares, which I assume represents the underwriters' efforts to distribute (i.e. unload) the 2.8 million shares they committed to buy from OXLC as part of this underwriting. We shall see if the market can absorb the full 2.8 million over the next few days and hold a price anywhere close to $17.
    11 Mar, 11:54 AM Reply Like
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