Co announces that NRDC Capital Management, has exercised all of their 8.0 mln warrants. NRDCs warrants were exercisable for ROIC's common stock at a price of $12.00 per share. NRDC exercised all of their warrants on a cashless basis. Based on common share price of $13.13 per share, ROIC issued 688,500 shares of common stock in a private placement to NRDC.The point to note is it is a cashless exercise. ROIC received no cash and issued only 688500 shares in exchange for warrants.Also there is close to 500K warrants exercised resulting in shares purchased with cash.
Not sure if this is good, bad or indifferent to the share price? It says ROIC received only about 6 mil total in this deal in cash. Vote of confidence in management I suppose but how dilutitive(sp?) is it to the share price?
Here's the press release:SAN DIEGO, Feb. 5, 2013 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (Nasdaq:ROIC) announced today that NRDC Capital Management, LLC has exercised all of their 8.0 million warrants. NRDCs warrants were exercisable for ROIC's common stock at a price of $12.00 per share. NRDC exercised all of their warrants on a cashless basis. Based on common share price of $13.13 per share, ROIC issued 688,500 shares of common stock in a private placement to NRDC.Richard A. Baker, Chairman of the Board of Retail Opportunity Investments Corp. stated, "The managers of NRDC Capital Management, William L. Mack, Robert C. Baker, Lee S. Neibart, one of ROIC's directors, and myself, are pleased to have converted all of our warrants into shares of ROIC's common stock. We continue to be impressed with ROIC's management team and their implementation of the company's business plan in creating one of the premier shopping center REITs on the West Coast."In addition to the exercise of the warrants by NRDC, to date other warrant holders have exercised 497,637 warrants, providing ROIC with approximately $6.0 million of proceeds. ROIC intends to provide information regarding future exercises of warrants on a quarterly basis.http://files.shareholder.com/downloads/ABEA-41YNGH/230676411...The exchange of 8 million warrants for 688,500 shares was cashless so ROIC received no cash for this transaction. However, this is better and less dilutive than exercising 8 million warrants for 8 million shares at $12 per share.The other and separate part of the press release mentions that other warrant holders had exercised 497,637 warrants thereby providing ROIC with $6.0 million in cash.David
Vote of confidence in management I suppose but how dilutitive(sp?) is it to the share price? There were 2 transactions. Please see the other in response to this query for all the details.As for vote of confidence, I think the holders who exercised the cashless warrants are part of a investor group that is also part of the management. So, I would not read it one way or other.Likewise, if someone had bought the warrants cheap and decided to exercise and take shares, that is good. I would not read much into this because they could have shorted the shares in the market and covered it by exercising the warrants you never know.We just have to wait and see whether the management is willing to make some offer for warrant holders but given the cashless exercise done at $13.13 close to 52 week high, I am not expecting the warrants to get much of a deal.
Here's more color on this exchange transaction from TMFSandman originally posted at the ROIC discussion board at the MF Inside Value site here in Fooldom:The key here is that the whole deal was a cashless transaction. Normally NRDC would have to pay ROIC $12.00 per warrant to exercise. That's a lot of money for 8 million warrants.So instead of NRDC actually paying ROIC $12 per share for each of the 8 million warrants, ROIC just issued NRDC the number of shares equal to the value of ($13.13 deal price - $12.00 warrant exercise price) * 8 million warrants:$1.13 * 8 million = $9.04 million worth of shares ROIC needs to issue to NRDCDividing $9.04 million by the $13.13 per share deal price = 688,500 shares.NRDC ends up with far fewer shares from the exercise but also isn't out the $96 million it normally would have cost them. Conversely though, ROIC doesn't get the $96 million in cash to spend on new shopping centers.
NRDC ends up with far fewer shares from the exercise but also isn't out the $96 million it normally would have cost them. Conversely though, ROIC doesn't get the $96 million in cash to spend on new shopping centers. Please note, NRDC warrants are cashless warrants. The other 40 million outstanding do not have that provision.
Just a few quick thoughts...As noted, insiders have exercised their warrants (8MM shares), and others have exercised about 500K. This news is mildly positive, as it begins to reduce the overhang, but it suggests that there will be no “grand bargain” involving the vast majority of the warrants. Tanz’ attitude towards the hedge funds that own most of the warrants seems to be: “Sell ‘em or exercise ‘em – we don’t much care.” If we get a continuing and gradual warrant exercise, this may be even more positive for us ROIC shareholders. It would reduce the overhang in an orderly manner, while providing ROIC with regular infusions of equity capital to fund its ongoing acquisition program. And the dilution to AFFO would be mild and gradual, not a "cliff" event in October 2014. There would be nothing exciting in this scenario, but that’s the kind of company ROIC is.Ralph
Just want to remind folks that exercise of the remaining warrants would increase net asset value per share.See past REITNUT posts on this theme:http://boards.fool.com/roicw-dumb-or-not-30206688.aspxhttp://boards.fool.com/MessagePrint.aspx?mid=30252921
but how dilutive is it to the share price?There are lots of ways to measure dilution. A simple way is to divide income, FFO and AFFO by the greater number of shares that are outstanding as a result of the exercise of warrants. This method would, indeed, reduce earnings, FFO and AFFO per share. But there are many REIT-dedicated investors who believe that the best way to measure a REIT stock's value is by looking at estimated NAV; there are lots of reasons for this, and anyone interesting in checking them out might want to take a look at "Investing in REITs." Green Street claims that REIT stock prices are more correlated with their NAVs, and changes in NAVs, than with any other metric.If the warrants are all exercised, NAV, which is now in the low-to-mid $11 area, will actually be increased, not diluted, as the exercise price is $12 per share. Of course, that doesn't mean that the stock would go up upon full exercise of the warrants, just that the stock will be more valuable - and it will probably take some time before investors figure that out. Another variable, of course, is how long it takes for ROIC to invest the cash received from the warrant exercise.There are a lot of moving parts in this warrant conundrum, and I confess to being frustrated by the relatively poor performance of ROIC's stock price over the past 6-12 months; the warrant exercise issue may be substantially responsible. (See, for example, http://finance.yahoo.com/q/bc?s=ROIC&t=6m&l=on&z...)But frustration is, for me, as far as it gets. I still really like this company, and believe it will perform better than most or all of its peers over the next few years. It would sure be nice, however, if we could get those pesky warrants out of the way. But we may have to wait for October of next year when they expire.Ralph
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