Annaly: REIT Panic Ahead

IncomeHunter profile picture

One person that did very well last year was the CEO of Annaly Capital Management (NYSE:NLY), Mike Farrell. His take home pay was $35 million, according to Bloomberg. Bloomberg noted that Farrell made more than the CEO's of the six largest U.S. banks last year. Not surprisingly, stockholders will want to know if Mr. Farrell earned all that money or not.

The market definitely does not think that Mr. Farrell earned his money, judging by the stock performance on May 9. Annaly's stock had earnings per share of just 49 cents. It also had a dividend yield of 55 cents a share. The share price on that day closed at $16.66, which was up slightly.

Yet people that bought into Annaly early might think that Mr. Farrell is worth the money. Bloomberg estimated that Annaly's returns have totaled 580% since its IPO. Bloomberg also estimated that the company's return for 2012 was a healthy 5.6%. Farrell's pay is apparently tied to the size and performance of Annaly.

Some of the experts that Bloomberg asked about Mr. Farrell and his business were less than thrilled with him. Doug Dachille, the CEO of First Principles Capital Management LLC and former head of proprietary trading at JP Morgan, said the kind of mortgage-backed securities that Annaly specializes in poses systematic risk. He called the securities' financing structure poor because they are subject to daily margin calls.

Annaly was seeking more capital on May 8. The company announced a new public offering of convertible senior notes. The offering is supposed to be worth $750 million and will close on May 14. Each of the notes will be convertible in 52.7969 shares of Annaly's common stock per $1,000 principal amount of notes. The stock conversion price mentioned in the Annaly press release for the offering is $18.94, which is actually higher than

This article was written by

IncomeHunter profile picture
I am a self-taught value investor. I manage my retirement portfolio and enjoy the game of bridge in my spare time. I write to help other investors discover hidden values in the market.

Recommended For You

Comments (61)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.