This was an outstanding article. I was looking for the same catalyst. You really did a great job putting this report together. I hope it got some extra traffic after I linked it on Seeking Alpha.
Thanks! Looks pretty good in hindsight. I even wonder if the article was brought up in deal negotiations. EFC's presentation includes a calculation showing its transaction delivers value of $5.55/share to AAIC, exactly the liquidation value I suggested:
"Using EFC’s 3/31/2023 book value per common share instead of market price per common share, total expected consideration for AAIC stockholders would be $5.46 per share in stock and $0.09 per share in cash, for total expected consideration of $5.55 per share"
I thought my estimate of liquidation cost was very conservative, but @TangibleValue on twitter pointed out that I missed dilution from another executive incentive plan with a share price target.
And while it worked out as predicted, it was not a sure thing because there was no large shareholder forcing action and management+board could have cynically opted to continue collecting their excessive compensation.
Great writeup. Agree something is up. The one point in your article that I disagree with is "It appears to be liquidating." If they were liquidating they would not have ceased repurchases of shares, which were zero for Jan-May of this year and were a big driver of book value the last few years. IMO they are fighting with an activist. Based on past behavior, their recent filing delays and the delay in annual meeting are and indication of rent-seeking management trying to protect their jobs by sitting on one or more liquidation proposals and possibly negotiating with whoever submitted it.
If anyone out there would like to submit proposals for the next annual meeting it can still be done. Normally they are due 90-120 days before the meeting, but because it has been delayed this year they will be required by bylaws to accept proposals for 10 days after announcement of the meeting. See the end of the paragraph below.
"To be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Corporation."
Thanks. It's possible that share repurchase was paused because the company had material non-public information about a possible sale or liquidation. I don't think AAIC has a 10b5-1 trading plan in place. It's possible that share repurchase was paused because a potential acquiror wants AAIC to have as much capital as possible.
Good stuff! I've been anticipating something of this nature for a little more than a year...wish it had only been a few weeks!
This was an outstanding article. I was looking for the same catalyst. You really did a great job putting this report together. I hope it got some extra traffic after I linked it on Seeking Alpha.
Thanks! Looks pretty good in hindsight. I even wonder if the article was brought up in deal negotiations. EFC's presentation includes a calculation showing its transaction delivers value of $5.55/share to AAIC, exactly the liquidation value I suggested:
"Using EFC’s 3/31/2023 book value per common share instead of market price per common share, total expected consideration for AAIC stockholders would be $5.46 per share in stock and $0.09 per share in cash, for total expected consideration of $5.55 per share"
I thought my estimate of liquidation cost was very conservative, but @TangibleValue on twitter pointed out that I missed dilution from another executive incentive plan with a share price target.
And while it worked out as predicted, it was not a sure thing because there was no large shareholder forcing action and management+board could have cynically opted to continue collecting their excessive compensation.
Great writeup. Agree something is up. The one point in your article that I disagree with is "It appears to be liquidating." If they were liquidating they would not have ceased repurchases of shares, which were zero for Jan-May of this year and were a big driver of book value the last few years. IMO they are fighting with an activist. Based on past behavior, their recent filing delays and the delay in annual meeting are and indication of rent-seeking management trying to protect their jobs by sitting on one or more liquidation proposals and possibly negotiating with whoever submitted it.
If anyone out there would like to submit proposals for the next annual meeting it can still be done. Normally they are due 90-120 days before the meeting, but because it has been delayed this year they will be required by bylaws to accept proposals for 10 days after announcement of the meeting. See the end of the paragraph below.
"To be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Corporation."
Thanks. It's possible that share repurchase was paused because the company had material non-public information about a possible sale or liquidation. I don't think AAIC has a 10b5-1 trading plan in place. It's possible that share repurchase was paused because a potential acquiror wants AAIC to have as much capital as possible.