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Prospect SEC victory not a "ringing endorsement" says KBW

  • "It's on one hand a clear positive that they don't have to restate, but on the other hand it's not like a ringing endorsement of their accounting policies," says KBW's Greg Mason after Prospect Capital (PSEC +4.6%) won an appeal with the SEC and will not have to restate past earnings.
  • The company will, however, have to alter future reporting, and Mason - awaiting further guidance from management - expects lower GAAP operating earnings, but no impact on net income.
  • As for the investor lawsuits, they've lost about all of their oxygen. "It's just a bunch of ambulance chasers that were trying to get their name on the door in case something material happened," says Mason.
  • Previously: Prospect wins appeal with SEC; no restatement necessary
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Comments (28)
  • critterlitter
    , contributor
    Comments (419) | Send Message
    Six of one, a half-dozen of another. In the end, the laundry gets done, Prospect moves on with business, and the shareholder benefits from a big BDC that knows how to operate in its field, make good deals, and pay a healthy dividend that rewards the shareholder.


    No news here.


    Let's move on...


    11 Jun, 01:55 PM Reply Like
  • Glucose
    , contributor
    Comments (248) | Send Message
    yeah ok, not a ringing endorsement ....
    Its like the golden opportunity of a lifetime... SEC was a non event and dividends to keep coming at 13% a year. ok go buy your endorsed FB or AMZN or whatever you're buying at 500000x PE ratios instead
    11 Jun, 02:15 PM Reply Like
  • kingdad
    , contributor
    Comments (1023) | Send Message
    Looks Like the Ambulance Chasers are trying to hold on to some suckers on the hope of collecting legal fees from them, since their lawsuits are fast evaporating.
    11 Jun, 02:19 PM Reply Like
  • locutus49
    , contributor
    Comments (1057) | Send Message
    Sounds like a buying opportunity to me.
    11 Jun, 03:03 PM Reply Like
  • jmkdog
    , contributor
    Comments (236) | Send Message
    Huh? Obviously the Analyst has no clue as to what transpired between the OCA and Prospect. This ABSOLUTELY IS AN ENDORSEMENT OF PAST PRACTICE IN ACCORDANCE WITH GAAP.


    The ASU update was APPLIED exactly the way it should have been. FY accounting in 2015.


    You are perpetuating the exact fear that cratered the stock. Time to reel in your opinions and deal in FACT. NO restatement, passed, BS behind
    11 Jun, 03:11 PM Reply Like
  • mythoughts
    , contributor
    Comments (163) | Send Message
    I hope all the ambulance chasers (attorneys) lost their butts on this non event. It sounds like the new reporting requirements could mean more net income and maybe increased dividends.
    11 Jun, 03:30 PM Reply Like
  • Argyll
    , contributor
    Comments (820) | Send Message
    The SEC does not endorse accounting policies.
    11 Jun, 04:07 PM Reply Like
  • jmkdog
    , contributor
    Comments (236) | Send Message
    I only used "endorsed" because it was used by Greg Mason of KBW.


    If the OCA says to Prospect "Your earnings, prior 10k, and 10q's are accepted as is" The SEC has AGREED with Prospect's appeal, hard to spin this into a NEGATIVE, but looks like Mason did


    The earnings are endorsed by the accounting firms that file them as well as the independent audit committee
    11 Jun, 04:21 PM Reply Like
  • whr1964s
    , contributor
    Comments (5) | Send Message
    I think the best outcome of this whole incident is that the lawyers don't have a case and hopefully the ones who hired them still get a nice big bill.
    11 Jun, 04:33 PM Reply Like
  • RuthCotter
    , contributor
    Comments (3) | Send Message
    If you want a ringing endorsement, how about the last 4 quarters of meeting or exceeding earnings expectations as well as years of sustained dividend history before that? Hard to beat.
    11 Jun, 04:33 PM Reply Like
  • mkhemmis
    , contributor
    Comment (1) | Send Message
    Too much up and down for me with this stock.
    11 Jun, 04:34 PM Reply Like
  • shillingfarmer
    , contributor
    Comments (8) | Send Message
    Gregg Mason's remarks fairly summarize the situation. The market wants to see a few quarters of properly reported financials. In any case, there is yield compression for BDC's going on and investors like myself want to see how well Prospect does for a few quarters with straight forward accounting and no events. So, pricing at a few percentage points discount to NAV after what we have witnessed is a reasonable expectation.


    I am long but not adding to my position.
    11 Jun, 04:34 PM Reply Like
  • jmkdog
    , contributor
    Comments (236) | Send Message
    I completely disagree. The chances the appeal was given to succeed were less than 20%. The stock was under constant short sale pressure from May 7th 2014 through June 10th 2014.


    The SEC issuing a no action after an appeal is HUGE. A a giant vote of confidence for investors. You have had straight forward accounting for years and it was done according to GAAP.


    If you are long , you erred not buying this 10% under book, IMHO. Mason's quote is either clipped and taken out of context for the purpose of perpetuating "accounting fears" or it is irresponsible. I do not need his opinion on what the OCA thinks as we already KNOW they issued effectiveness to PAST FINANCIALs(capital for emphasis) not anger.
    11 Jun, 04:59 PM Reply Like
  • locutus49
    , contributor
    Comments (1057) | Send Message
    jmkdog is correct. This is a rare, and enormous, victory. How often does the SEC yield to a company they are investigating or challenging? This may be the first time ever.


    There are people who are out to sabotage PSEC for personal reasons. But the facts are plain. PSEC survived this threat and will continue to prosper. Short PSEC at your own risk. I rate it a screaming BUY. But I'm biased towards high monthly dividends. That is my agenda. Full disclosure.


    Very long PSEC.
    11 Jun, 05:28 PM Reply Like
  • dnorm1234
    , contributor
    Comments (1126) | Send Message
    >This may be the first time ever.


    I hope you don't honestly believe this.
    12 Jun, 02:03 PM Reply Like
  • Uain53
    , contributor
    Comments (1492) | Send Message
    "As for the investor lawsuits, they've lost about all of their oxygen..."


    The thought of Non-Producing Entities gasping their last fetid breath is comforting indeed.


    long (PSEC) and nice to see this victory for us investors.
    12 Jun, 01:16 AM Reply Like
  • Dividends#1
    , contributor
    Comments (2772) | Send Message
    I do enjoy all the positive shareholders on this thread. I am one of them. I am a new PSEC shareholder. I have a cost basis of $9.97 ( this includes my dividends being reinvested). I now have almost 20% of my Retirement portfolio in PSEC, that is my conviction level.


    We do need some wall of worry to climb. So, I welcome the negative comments also. I also welcome events that the market percieves as negative that turn out to be positive or even a non event in reality. Gives us shareholders lower prices to reinvest our dividends or if the sale price is really good, increase our positions.


    Where is brucejfern when you need him? He is negative about my entire portfolio. Anytime an article is written about one of my stocks, bruce slams it, and I mean ALL 4 of my stocks! Funny coincidence. LOL.


    I only own 4 stocks. I have been retired almost 1 year now.


    12 Jun, 10:13 AM Reply Like
  • locutus49
    , contributor
    Comments (1057) | Send Message
    Nice. I went with KMI instead of KMR to avoid tax complications.


    You may want to expand to similar stocks. T is a great bargain now, I have owned it and MO for 20 years. Most of my other stocks are near all time highs (LMT, JNJ, MRK, MCD, etc) so I'm waiting for a dip to add to them.


    Some utilities like SO and ED are also options to diversify your portfolio while keeping your yield high. Not sure if they are fairly valued right now, haven't checked lately. I only buy stocks that are 4% yield or over, since I am retired.


    Bruce has appeared on the threads of every stock I own bashing the author and the stock. That tells me I made a good BUY decision.
    12 Jun, 11:40 AM Reply Like
  • Rob1492
    , contributor
    Comments (362) | Send Message
    what happened to MTGE? Did you give up your 3%
    12 Jun, 11:56 AM Reply Like
  • Dividends#1
    , contributor
    Comments (2772) | Send Message
    Hi locutus,


    What tax complications on KMR? No taxes in my taxable account. And the cost basis does NOT go down as the share dividends are paid.


    Here is my latest update and my personal situation regarding my viewpoint of taxes.


    locutus, I like all your stocks. I might expand as the years pass. I am happy with my portfolio as of now. I think my current yield is about 9%. I will do the math tonight. YTD + 22% Total Return


    LATEST UPDATE: 6/4/2014


    I had sold a significant amount of KMR last year in the mid to high 80"s and some in the low to high 70's ( made a nice profit) in order to buy AGNC when Mr. Market's voting machine had overreacted resulting in an approximate 20% discount to BV for AGNC shares. Since the discount to BV has narrowed to an approximate 8% or so currently, I decided yesterday to rebalance my portfolio and SOLD ALL my AGNC shares in my taxable account and used the proceeds to buy KMR. I hold most of my AGNC shares in my ROTH IRA now and the rest in my SEP IRA.


    By selling AGNC ( taxed as ordinary income) in my taxable account and replacing with KMR ( ZERO taxes in a taxable account because they pay their distribution in shares) I will have zero taxes incurred from my taxable account. Because KMR results in zero taxes it's yield is = to the yield I was receiving from AGNC ( ordinary income tax).


    I also did a ROTH Conversion, which put me in a higher tax bracket. I will be paying taxes on the Roth Conversions for the next 2 years (as I am planning to do another one in 2015) I am willing to pay the taxes now, in order to have tax free dividends down the road from the ROTH. I will not convert my entire Traditional IRA, so when I take distributions, I will have to pay taxes then. My goal is to have a low % of my funds in the Traditional IRA, and therefore my taxes will be kept low in the future.


    I feel real good about this as I was heavily overweight AGNC last year as it comprised almost 65% of my portfolio. Recently I had sold down to 50% and yesterday I sold down to 42%.


    So now my Retirement portfolio is:


    AGNC = 41.7%


    MO = 38.7%


    PSEC = 19.6%


    My Taxable Account is:


    KMR = 100%


    No taxes on the KMR Share Dividends, and when I sell my capital gains will be offset by my carry forward losses ( about 220K).


    Allocation when combining Retirement Accounts + Taxable Account:


    AGNC = 30% rounded


    MO = 28% rounded


    KMR= 28% rounded


    PSEC= 14% rounded
    12 Jun, 12:15 PM Reply Like
  • kingdad
    , contributor
    Comments (1023) | Send Message
    I would say I'm in the same situation as the posters below.
    I've been doing my best since I was forced into early retirement to grow the Retirement Portfolio. After a rough start due to some inexperience I am now and have been a Big Player in the MReit sector and to a lesser degree in the BDC sector. I like Locutus aim for High sustainable Dividend returns with hopefully some degree of Capital Protection/preservation. Last year was not kind in the CP segment but the Good Dividends helped me to maintain overall Value and Position. This year I have Added PSEC (13%)and T (5+%) to my other Holdings (neither of which are being particularly kind of late) but will help me diversify more and a few shares of GOF a CEF (10+%) to go with my IVR (10%), REM (15.5%) along with two Preferred mReit stocks NRFPRB and RSOPRB (both paying about 8.35% each between them. - Both bought under BV price of $25 ps) Sold my NRFPRC Shares earlier to fund my T, GOF and PSEC purchases above BV of $25ps and after taking a nice set of Dividends off that one too) * the symbols for the Preferred shares are from Fidelity, Yahoo uses a -pb or -pa or -pc for I'Ding Preferred shares, ie NLY-PA * didn't want to cause any confusion for our readers. YTD IRA id Up 13.7% with three or more dividend payments still due. Should be a Good Year.


    I'm ahead on all positions when Dividends are factored in and Look to tweak my ATT position and my GOF position with a sale of some 500 shares of IVR later this year. I want another Dividend from it first.
    12 Jun, 01:12 PM Reply Like
  • Dividends#1
    , contributor
    Comments (2772) | Send Message
    Hi Rob,


    Yes, I sold MTGE to buy more PSEC. I could not pass up the $9.57 sale on PSEC.


    I kind of like to be concentrated.


    Going out. Cant sit on the computer all day. Time for exercise.
    12 Jun, 12:09 PM Reply Like
  • jmkdog
    , contributor
    Comments (236) | Send Message
    Hats off to Dividends#1 and others who believed and improved returns by adding rather than going down the fear based path of the panic seller.


    I borrowed @119% to complete my 9.82 purchase of 36000 shares. Why?
    Because the pps appreciation already paid off the loan because i was able to use my margin once we got back to TEN.


    Keep your chins up folks, we will be just fine.


    I am 90% PSEC 10% UTX and small small position in ALV
    12 Jun, 02:00 PM Reply Like
  • locutus49
    , contributor
    Comments (1057) | Send Message
    Wow you guys have guts, that's for sure. I need around 20 stocks to feel I can weather any problems with one or two stocks. And many have criticized me for not being diversified!!! Good luck to you.


    Long PSEC and various others.
    12 Jun, 02:34 PM Reply Like
  • Dividends#1
    , contributor
    Comments (2772) | Send Message
    Thanks for the acknowledgement jmkdog,


    I have been reading your comments and enjoying them.


    I also like your fighting spirit that comes across in your comments.


    Keep them coming.
    12 Jun, 06:50 PM Reply Like
  • kingdad
    , contributor
    Comments (1023) | Send Message
    I did a couple of those Back the truck up to the loading dock Trades over the past couple years. Made Money Overall and can't complain. But there were days when sweating bullets was the norm. Since then I try to trade in and out of certain mReits or BDCs when I have a few % Profit in share price and have collected some good divys along the way. Market timing never works but I have been able to trade out near the tops and buy back in near some of the dip bottoms. These types of investments require daily and sometimes hourly monitoring and sometimes you just have top go with your gut! Good Luck to all of you and a Happy Father's Day to all the Dear Old Dads out there, myself included.
    13 Jun, 03:00 PM Reply Like
  • jmkdog
    , contributor
    Comments (236) | Send Message
    10.40, blah , blah.. ringing endorsement :-)
    12 Jun, 03:49 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (2426) | Send Message
    Lol jmkdog...just another day in the business world.
    13 Jun, 01:23 PM Reply Like
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