After all, most capital raising requires a discount to current price levels, and somehow
the diluted value of the equity needs to represent a premium price where new capital gets put in.
Not exact matches
Here's an example from American Capital Agency's (NASDAQ: AGNC) 2013 annual filings:» [W] hile our stockholders bear the risk
of our future
equity issuances...
diluting the
value of their stock holdings in us, the compensation payable to our Manager will increase as a result
of future issuances
of our
equity securities.»
'' [W] hile our stockholders bear the risk
of our future
equity issuances...
diluting the
value of their stock holdings in us, the compensation payable to our Manager will increase as a result
of future issuances
of our
equity securities.»
So, that's my preferred measure for how much has the underlying
value of the firm increased: growth in fully
diluted tangible book
value (ex-AOCI), adding back dividends, and subtract out net
equity issuance / buyback measured not at cost, but at the current market price.
Companies with debt / interest in excess
of that risk suffering: i) a significantly adjusted price for their
equity in the event
of a takeover — acquirer will refuse to take on debt, or will take on debt but haircut
equity to compensate, ii) an eventual rights issue / placing to pay - down debt — this will probably hurt the share price and / or
dilute intrinsic
value per share significantly, or iii) investors will mark down company severely at some point.
Growth in fully
diluted tangible book
value (ex-AOCI) is a good measure
of firm performance, if you add back dividends, and subtract out net
equity issuance / buyback measured not at cost, but at the current market price.
«By issuing
equity, REITs are
diluting the
value for existing shareholders, so they need to have to have some sort
of plan for the money,» Lail says.