New Preferred Stock IPOs, June 2022
* As June 2022 comes to a close, we look back at the new preferred stocks and ETDs introduced during the month, offering annual yields ranging from 6.25% to 13%.
* Here is a comparison against highest quality preferred stocks in our coverage universe, as ranked by our internal “CDx3 Compliance Score” metric:
* CDx3 preferreds ranked 10 out of 10 are meanwhile selling for an average discount to par of 3.6% and offer an average current yield of 5.77%.
* Past preferred stock IPOs now trading below par: a look at recent par crosses.
About the new issues
PacWest Bancorp completed an offering of 20 million shares of new non-cumulative perpetual preferred stock, offering a fixed dividend rate of 7.75%. The new shares were rated BB- by Fitch, BBB- by Kroll, and BBB by Egan-Jones. The shares traded temporarily on the OTC under symbol PACWL before moving to permanent symbol PACWP on the Nasdaq, where they now command a premium to par, with recent trades above the $25 offering price. As we reported in our monthly Research Notes subscriber newsletter, several PacWest insiders participated in the offering:
Source: CDx3 Monthly “Research Notes” Newsletter
[As also reported in our monthly newsletter, there were also a number of after-market/open-market insider buys among several other preferred stock issuers in June, ranging from small to large insider buys, including among the preferred shares of Eagle Point Income (EIC), NexPoint Real Estate Finance (NREF), Harbor Custom Development (HCDI), New York Community Bancorp (NYCB), Sotherly Hotels (SOHO), and Fat Brands (FAT). Links in this paragraph point to relevant example SEC filings on form 4. ]
Bitcoin mining company BitNile Holdings completed an offering of 144,000 shares of new series D cumulative perpetual preferred stock, offering a fixed dividend rate of 13% paid monthly. The company indicated that proceeds would be used to acquire bitcoin miners. Following the offering, the company filed for an “at-the-market” offering program to sell an additional up-to $46.4 million worth of the new preferred series. The new shares are unrated and trade on the Nyse American exchange under symbol NILE-D, where they currently change hands at around the $21.90/share level.
Oxford Lane Capital priced an offering of new 7.125% term preferred stock due in 2029, raising $60 million in gross proceeds. The company indicated that the proceeds will be used to acquire new investments. Dividends are paid monthly, and the new shares traded temporarily on the OTC under symbol OXFCP before moving to permanent symbol OXLCN on the Nasdaq.
Great Elm Group priced an offering of $25 million of new exchange traded notes due 2027, offering a fixed coupon of 7.25%. The company indicated that proceeds from the offering will be used to make investments in its private real estate investment trust Monomoy Properties REIT, whose investment management agreement was recently acquired by Great Elm. The new notes were rated BBB- by Egan-Jones and trade on the Nasdaq under symbol GEGGL.
Horizon Technology Finance priced an offering of $50 million of new 6.25% exchange traded notes due 2027. The company indicated that proceeds would be used to pay down its revolving credit facility. The new notes received a credit rating of BBB from Egan-Jones, and trade on the New York Stock Exchange under symbol HT
Sources: Preferred stock table: CDx3 Notification Service database.
SEC filings: PACWP, NILE-D, OXLCN, GEGGL, HTFC
Buying new shares for wholesale
Preferred stock IPOs often involve a temporary period during which OTC trading symbols are assigned until these securities move to their retail exchange, at which time they will receive their permanent symbols.
But there is no need to wait. Individual investors, armed with a web browser and an online trading account, can often purchase newly introduced preferred stock shares at wholesale prices just like the big guys (see “Preferred Stock Buyers Change Tactics For Double-Digit Returns” for an explanation of how the OTC can be used to purchase shares for discounted prices).
Those who have been following this strategy of using the wholesale OTC exchange to buy newly introduced shares for less than $25 are more able to avoid a capital loss if prices drop (if they choose to sell). Our CDx3 Notification Service offers email alerts are a useful tool for investors interested in buying during the temporary OTC period, with the alerts informing you when new OTC preferred stock symbols begin trading.
Your broker will automatically update the trading symbols of any shares you purchase on the OTC, once they move to their permanent symbols. A special note regarding preferred stock trading symbols: Annoyingly, unlike common stock trading symbols, the format used by exchanges, brokers and other online quoting services for preferred stock symbols is not standardized.
For example, a given Series A preferred stock might have a symbol ending in “-A” at TDAmeritrade, Google Finance and several others but this same security may end in “PR.A” at E*Trade and “.PA” at Seeking Alpha. For a cross-reference table of how preferred stock symbols are denoted by sixteen popular brokers and other online quoting services, see “Preferred Stock Trading Symbol Cross-Reference Table.”
Past preferred stock IPOs below par
Here are some of the recent dips/crosses below par that our CDx3 Notification Service subscribers received email notifications about (while the primary thrust of our subscription service is alerting about new IPOs and ranking them with a CDx3 Compliance Score, we also monitor past IPOs and offer email alert options when high-ranking past IPOs make crosses below par value – learn more here):
Source: Free CDx3 Weekly Preferred Stock Newsletters, June 2022. Note: Any yellow highlighted entries indicate eligibility for the “CDx3 Bargain Table” page (one of our most popular subscriber pages).
Until Next Time…
Here at CDx3, our typical articles will provide month-end preferred stock (and ETD) IPO summaries, plus a look at selected past preferred stock IPOs that are now trading below par; often the reward on offer for “imperfect” preferred stocks is very high relative to the fully CDx3-compliant professionally credit-rated securities.
Whether you are the kind of investor who sticks with preferred stocks with a CDx3 Compliance Score rated 10 out of 10, or whether your portfolio has room for 9-score-and-lower securities, stay tuned for future articles recapping new IPOs and interesting preferred stock activity that we notice here at the CDx3 Notification Service. Thanks for reading!