The results aren’t so surprising given the fact that a) the controlling insider (Howard Jonas) was not participating, b) the yield isn’t as attractive compared to other preferred offerings and c) most of the upside in this small company – the shale assets – will be retained by the common. It is worth noting that Mr. Jonas’ controlling stake was solidified even further though and his exposure to the shale assets has increased.
It will be interesting to see what happens with the preferred shares. I think Hypezero is correct – the weak interest will likely mean that the shares will be very thinly traded, but on the flip side, there is a higher likelihood of receiving timely payments (and not in arrears) as the dollar amount is much smaller than it could have been. While there shouldn’t be any expectations of forced selling, the shares are worth monitoring to see if there is ever a drop making the current yield even more attractive. It is worth noting that the market for GNE common, which also isn’t heavily traded, could also become tighter as a result of this transaction.
Disclosure: Author owns share of GNE common.
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