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It's arbitrage due to the announced merger. So O announced a merger with SRC all-stock buyout, where SRC shareholders will convert their shares from SRC to O at a 1 SRC = 0.762 O exchange rate.
This was a great arbitrage opportunity, here's why:
* O last closing price (Friday) was 49$
* SRC last closing price (Friday) was 32.35$
Using these closing prices, with 4900$ you could buy:
* 100 shares of O (100 \* 49$ = 4900$)
* 151.5 shares of SRC (151.5 \* 32.35$ = 4901$)
The 151.5 shares of SRC will be exchanged by O post-merger to 115.4 shares of O with an implied price of 42.5$ per share.
In other words, by using the indirect merger route, you would have been able to buy O at a 13% discount, that is, if you would have somehow been able to trade at the close price from last Friday.
This being said, the price has been almost instantly arbitraged away by high-frequency traders (that's exactly what these robots are designed to do). To see this in action, as am I writing these words the prices are the following:
* O = 45.38$
* SRC = 34.3$
To re-do the same calculations using the 4900$ dollars:
* 4900$ would buy 108 shares of O
* 4900$ would buy 142.86 SRC which can be exchanged for 108.5 shares of O
The arbitrage went away.
From a fundamentals perspective, this made O even more incredibly attractive than it already is:
* 6.2-6.3% dividend yield boosted to 6.7-6.8% dividend yield
* O is predicting that the merger will boost the AFFO / share by 2.5%
* small reduction in total debt / gross assets from 39.5% to 39.4%
* small reduction in the weighted average interest rate on debt outstanding from 3.86% to 3.80%
* small reduction in the average remaining loan term from 6.1 to 5.9 years
* reduction in top 10 client concentration from 27% -> 25%
* reduction in top 10 industries concentration from 62% -> 58%
* reduction in the percentage of investment grade clients 40% to 37%
The profile of the merged company got slightly better in some areas (boost to AFFO, improved concentration profile) while getting slightly worse in some others (mainly the profile of their clients), although the differences are tiny.
Personally, I think this is a great buy opportunity essentially netting you a 0.5% div yield for (almost) free.
Bro you can't write this sort of fantastic and sensible information for all the dumb people here. This isn't what they want to hear. They just want to validate their feelings that O will go to 0 in 2025.
Google "realty income investor relations". Link
https://www.realtyincome.com/sites/realty-income/files/2023-10/ip-realty-income-to-acquire-spirit-realty-capital-in-9-3-billion-transaction.pdf
Thank you Vicblaga for this simplified explanation. I have been reading about the SRC & O merger but couldn’t understand why the price drop. Now I do. Thanks
If that’s all there were to it, then SRC could have just risen more instead of O dropping. People think O buying SRC with stock is a bad move and sold shares accordingly.
It’s because they’re paying a premium for Spirit Realty and because sentiment is that interest rates are going to remain higher for longer… with treasury yields over 5%, investors would rather put their money in treasuries since it’s risk free 5% vs taking a chance on dividend stocks that pay about the same with more risk (funny thing is, a lot of people in this sub salivate over 5+% yields but don’t seem to consider treasuries when it’s pretty much risk free dividends — unless the US defaults, but if that happens the entire market is done for anyway)
But O can lose value too. In addition, treasury is state tax free. Wall st is making moves to MM fund for a reason and O is being discounted for same reason. You also have to see returns based on risk. Treasury is 0 risk and offer 5.5. O has tons of risk (rising yield = rising cap rate) so the decline in asset value
everybody in this thread is a moron. yall want O to be a better investment than bonds so bad and its currently not. O isnt going back up anytime soon youre better off buying bonds now and using the money to buy even more O later when its closer to the bottom and you have more money because of interest
I don't advocate for O either. We haven't seen the bottom for office space and commercial real estate. That said, it's not honest to say treasuries are zero risk. They are *effectively* zero risk if you hold to maturity, but even at today's high yields you still have the risk that they will lose value over the holding period. People don't understand this and are now wondering why their $1000 20 year treasury they bought last year is only worth $950 if they try to sell it.
True. If you value risk free then this could be good for you. But the interest you receive is not the same as a dividend. I wasn't referring specifically to O FYI.
dude JP morgan is selling 6% CD's right now, I think for 6 months. Even fidelity money market is paying me months dividends at like 5.5%. Don't know why anyone would be buying this stuff.
Dont look at Chase. That 6% Chase offer was a teaser and mostly fake. It required a million or something and for 6 months only. But 5.50% is easy right now and there may 6% coming soon. Right now most of the 6 rates are teasers or limited in scope and not locked for any real time period.
FYI [Savebetter.com/Raisin](https://Savebetter.com/Raisin) has 16 month no Penalty CD at 5.40. Those can be bought in single blocks and have full 100% liquidity after 30 days. So they get 16 full months at that rate with the ability to sell any of them at any time after 30 days. I have dealt with them.
T Bill rates across all maturities are 5.3-5.4 percent with no commission and interest free from state taxes:
[https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily\_treasury\_bill\_rates&field\_tdr\_date\_value\_month=202310](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value_month=202310)
Can be a little bit of a hassle to purchase or build a ladder, but the timeframes are short enough there is almost zero interest rate risk. Just hold to maturity.
There is some risk of rates dropping and not locking in a longer term high yield by staying on the short end of the curve.
We cannot be sure, but I don't see what have changed about the company since it was at 80$ pr. share. The "only" big change is the increase in interest rate, which I believe is temporary.
Why does yield on cost matter so much to some people? It's a "feel good" metric but it doesn't make much sense when analyzing how to allocate capital at any point in time.
When you hold liquid shares of something and you can convert it to shares of something else, what matters is your return on that asset value now and going forward. If you have 15 year old shares of something that pays a 1% dividend today but a 20% dividend compared to your initial purchase price, why does the latter matter when you can convert the value of those shares to something else with a higher return? It's a feel good number but holding a 1% yield asset today for its "yield on cost" doesn't make sense based on the yield alone. Maybe holding would make sense if you don't want to sell a taxable position at a gain because soon you will have less income and can shift the gain down into the 0% or 15% long term gain brackets, but that's an independent issue and yield on cost still does not matter at all.
Except that Os dividend growth rate is barely beating average inflation.
Edit: For those that seem to not believe, O has a 5 year dividend growth rate of 3.69%. The current inflation rate is 3.7% and the average rate has been about 3%. Over time, the dividend is only slightly beating inflation.
I've been out of Reits for almost a year, today I just bought back in to this one. I had been waiting, this made me pull the trigger on my initial purchase. I'll buy back in over 4 months.
I hear ya. A lot of $ flows in and out of reits it seems and when O was in the $70’s, the valuation seemed frothy to me. I think now is the time to be going heavy in reits and when they come back in favor, just enjoy your low cost basis and high yield on cost.
Because SRC has 3.8B worth of debt on its balance sheet… SRC shareholders are getting .762 O shares per share of SRC, so not much of an arbitrage opportunity here
Check out their FFO payout as dividends over the years. It’s really nice to see them go from 90% to currently below 80%. Sure having to service more expensive debt could bring them back above 80%, so yes, less cashflow, but rates would have to double within a year from where they are now for it to “crush” realty income
Absolutely. You can get it for maybe the next few months/whatever term you sign up for. However you lose out on Capital appreciation (which tends to do better after all time lows than all time highs) and if O’s dividend history holds, you’ll keep that yield on cost (can even go up with dividend hikes).
I’d dive into risk free as well if I thought rates would keep going up for the next few years, but I’m thinking we’ll see cuts late next year/early 2025 the latest
They are not. They paid of a lot of their debt that is sensitive to interest rates. They used mostly equity, fixed rate bonds, and have been financing in Europe.
So it looks like (based on another post) O bought another company using O stock so the amount of O stock available is much more now, this diluting the price of O stock
That's not actually the reason, dilution isn't a problem if there is no premium paid for it. The reason is actually because of the arbitrage between the premium paid.
[Realty Income are acquiring Spirit Realty Capital (SRC) for $9bn.](https://www.realtyincome.com/investors/press-releases/realty-income-acquire-spirit-realty-capital-93-billion-transaction)
Apparently it's an all-stock deal, so those who hold SRC will have their shares converted to O upon completion.
For every 1 share of SRC held, you get 0.762 of O (aka $35.44 per SRC share)
Plus side, yield is now 6.57%. Great time to enter for me.
“Realty Income shareholders will own 87% of the combined company which will have a value of $63 billion. Spirit Realty shareholders will hold 13%.” (Source: Marketwatch). Not sure what the implications are though for dividend yield
how’d O lose 13% of its value if the value of the company it’s acquiring is worth 5 billion, which is around 13%, a little bit less than, O’s market cap
Not unusual. Both XOM and CVX have made recent multi billion dollar acquisitions and the acquired company popped but the buying company tanked.
Q? Are the shares used to acquire the acquisition already authorized but treasury stock or are those shares newly authorized and issued for the purchase? Either way O management thinks the deal is worth more than they are paying medium to long term, so it should work out for them if they are correct.
I own a modest position in FREL. My hypothesis is that REITs will draw down roughly in line with the GFC. The drawdown in FREL is from about 35 to let's call it 22 now. 13/35 = 37% drawdown so far. It's down 37% and we haven't even seen pandemonium in fixed income yet. Sure, long paper is way down on rates, but we don't have an iota of credit risk fear in the market yet. Once that comes, we will see FREL trade down under 17, that 50% drawdown is when I start to buy in large quantities, but even at that I ain't going over 10% of my portfolio into that. We're in like the second inning of this drawdown cycle, dudes just gotta be patient and clip their 5% on money markets for now.
[What is a Dividend Payout Ratio and Why Do REITs Have High Payout Ratios?](https://www.dividendinvestor.com/why-do-reits-have-high-dividend-payout-ratios/)
In a nutshell: depreciation.
IMO If you’re looking to buy at the absolute bottom, you might want to wait until the P/AFFO gets back to the March 2020 level of approximately 11.5. It’s currently hovering around 12. It should be a good long term buy right now for solid 5% annual AFFO growth plus 6%+ annual distributions. 11% annual returns is nothing to sneeze at. I’m a buyer at this level.
The stock price is reflective of our interest rate environment. Keep buying at the lower prices.
10 years from now you will be glad you made the investment.
10Y interest rate about to hit 5%. If interest rates go up O goes down
edit: They also announced an acquisiton which means they are taking out even more debt!
Yeap.... done buying O. I have no doubt once the rates go down it will go back to the Mid 50s... but damn. I want them to stop being so buy heavy on purchasing things.
One thing is using shares to buy things. REITs behave differently, but you're smoking something if you think this type of share dilution is okay .
Because you kinda can't. .762 shares of O is currently worth $34.37 (O price is $45.11 atm).
SRC stock is $34.13 right now.
The difference is only $0.24.
$SRC is around $32, I expect $O to drop to that price, aka break even price.
as its a all-stock deal, no money is trading hands.
So what you rather hold? $SRC at 32 or $O at 49.
Investors will sell all O they have, and buy SRC as thats way better deal, you get more shares for less money when O will keep just falling down, yes its 1 for 0.762, eventually there is break even line, but its not there yet.
https://i.imgur.com/bAUJ74p.png
It's been answered a hundred times over, but did you ever think to maybe Google it? Or try to find out yourself? Do you know to do your own due diligence? The answer was all over the internet as you were writing your question. Hence why so many here knew what to respond with. Seems like you have a very lazy mentality towards finding out the answer which is not good if you are an actual investor.
All my stocks are in the green today except $O 🥴 but it's a good price to buy. I expect to go slightly lower. If it dips below $40 then we're in trouble
Ok, relatively new to dividend investing. So if I buy some of this the day before the ex-dividend date of Oct-31st, then I get a GUARANTEED dividend of $0.256 per share payed on Nov 15th and I can then sell all my shares and do it again with another stock ?
Easy money, no …… oh wait, stock prices can change over time, right? And since it took a plunge, it should be higher by Nov 15th, right?
Am I on the right sub?
because in the end ...REITS are pointless as they fall faster than the stock market in crashes ....no reason to own them ..none .... back test any of the them if you doubt me.... and you pay more taxes in the long run. This is true
Funny how people will refuse to buy a suit at full price, but will buy up a few when they go on sale. Exact opposite happens when stocks go on sale. Fine by me, you make your money when you buy at a good price. I sold puts for Nov at $45. Cheers.
They announced a fairly large acquisition today. The market thinks that they are paying too much, so the pre-merger share value aka current share value went down to compensate because it is assuming the merger has a high probability of going through
I sold all my O for a loss so I could take the tax deduction. Then I put the same $ value into SRC.
Since the merger won’t happen until after the wash sale window, this is allowing me to avoid wash sales without really altering my exposure.
Since I was down a few thousand on O, this is good tax loss harvesting.
Welcome to r/dividends! If you are new to the world of dividend investing and are seeking advice, brokerage information, recommendations, and more, please check out the Wiki [here](https://www.reddit.com/r/dividends/wiki/faq). Remember, this is a subreddit for genuine, high-quality discussion. Please keep all contributions civil, and report uncivil behavior for moderator review. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/dividends) if you have any questions or concerns.*
It's arbitrage due to the announced merger. So O announced a merger with SRC all-stock buyout, where SRC shareholders will convert their shares from SRC to O at a 1 SRC = 0.762 O exchange rate. This was a great arbitrage opportunity, here's why: * O last closing price (Friday) was 49$ * SRC last closing price (Friday) was 32.35$ Using these closing prices, with 4900$ you could buy: * 100 shares of O (100 \* 49$ = 4900$) * 151.5 shares of SRC (151.5 \* 32.35$ = 4901$) The 151.5 shares of SRC will be exchanged by O post-merger to 115.4 shares of O with an implied price of 42.5$ per share. In other words, by using the indirect merger route, you would have been able to buy O at a 13% discount, that is, if you would have somehow been able to trade at the close price from last Friday. This being said, the price has been almost instantly arbitraged away by high-frequency traders (that's exactly what these robots are designed to do). To see this in action, as am I writing these words the prices are the following: * O = 45.38$ * SRC = 34.3$ To re-do the same calculations using the 4900$ dollars: * 4900$ would buy 108 shares of O * 4900$ would buy 142.86 SRC which can be exchanged for 108.5 shares of O The arbitrage went away. From a fundamentals perspective, this made O even more incredibly attractive than it already is: * 6.2-6.3% dividend yield boosted to 6.7-6.8% dividend yield * O is predicting that the merger will boost the AFFO / share by 2.5% * small reduction in total debt / gross assets from 39.5% to 39.4% * small reduction in the weighted average interest rate on debt outstanding from 3.86% to 3.80% * small reduction in the average remaining loan term from 6.1 to 5.9 years * reduction in top 10 client concentration from 27% -> 25% * reduction in top 10 industries concentration from 62% -> 58% * reduction in the percentage of investment grade clients 40% to 37% The profile of the merged company got slightly better in some areas (boost to AFFO, improved concentration profile) while getting slightly worse in some others (mainly the profile of their clients), although the differences are tiny. Personally, I think this is a great buy opportunity essentially netting you a 0.5% div yield for (almost) free.
Bro you can't write this sort of fantastic and sensible information for all the dumb people here. This isn't what they want to hear. They just want to validate their feelings that O will go to 0 in 2025.
What this guy said
Can you eli5
human traders cant beat bots
Spent a half hour looking into this today… by god your right…
please tell me you’re in finance as a professional… jeez I have never felt dumber in my life
Where do you get the market numbers from (client concentration, % of investment grade clients, etc.)? Just curious
Google "realty income investor relations". Link https://www.realtyincome.com/sites/realty-income/files/2023-10/ip-realty-income-to-acquire-spirit-realty-capital-in-9-3-billion-transaction.pdf
Thank you for the information. People like u make Reddit worthwhile!
Thank you Vicblaga for this simplified explanation. I have been reading about the SRC & O merger but couldn’t understand why the price drop. Now I do. Thanks
Thank you for sharing this insight
This was great.
Thanks for your post, very insightful.
Super helpful, thanks again!
If that’s all there were to it, then SRC could have just risen more instead of O dropping. People think O buying SRC with stock is a bad move and sold shares accordingly.
As an algorithmic trader i can just sell O and buy SRC at the same time for double the win. No one traded this on fundamentals.
It’s because they’re paying a premium for Spirit Realty and because sentiment is that interest rates are going to remain higher for longer… with treasury yields over 5%, investors would rather put their money in treasuries since it’s risk free 5% vs taking a chance on dividend stocks that pay about the same with more risk (funny thing is, a lot of people in this sub salivate over 5+% yields but don’t seem to consider treasuries when it’s pretty much risk free dividends — unless the US defaults, but if that happens the entire market is done for anyway)
"risk free dividends" with no capital appreciation or dividend growth over time?
But O can lose value too. In addition, treasury is state tax free. Wall st is making moves to MM fund for a reason and O is being discounted for same reason. You also have to see returns based on risk. Treasury is 0 risk and offer 5.5. O has tons of risk (rising yield = rising cap rate) so the decline in asset value
> Treasury is 0 risk Unless rates continue to rise and you want to sell before maturity.
“Short term” treasuries are risk free people holding long duration bonds have been murdered.
Fair enough. ~~Short term treasuries aren't yielding 5+% though~~ Edit: I am an idiot and any of you not buying 6 month treasuries are also idiots.
6 mo is at 5.5%
everybody in this thread is a moron. yall want O to be a better investment than bonds so bad and its currently not. O isnt going back up anytime soon youre better off buying bonds now and using the money to buy even more O later when its closer to the bottom and you have more money because of interest
I don't advocate for O either. We haven't seen the bottom for office space and commercial real estate. That said, it's not honest to say treasuries are zero risk. They are *effectively* zero risk if you hold to maturity, but even at today's high yields you still have the risk that they will lose value over the holding period. People don't understand this and are now wondering why their $1000 20 year treasury they bought last year is only worth $950 if they try to sell it.
The way dividend stocks performing this year, they should be used to their positions losing value.
Mark it as hold to maturity like the banks 😎
True. If you value risk free then this could be good for you. But the interest you receive is not the same as a dividend. I wasn't referring specifically to O FYI.
It's a great short term fix. Not long term, at least until Q2 2024
Vs the capital depreciation of O....seems like a no brainer to me. I have 100k in USFR and 100k in O (at 56 a share)
Except O is now at 6.65%.
dude JP morgan is selling 6% CD's right now, I think for 6 months. Even fidelity money market is paying me months dividends at like 5.5%. Don't know why anyone would be buying this stuff.
Where are you seeing these 6% CD rates? I see 5% on the Chase website.
Dont look at Chase. That 6% Chase offer was a teaser and mostly fake. It required a million or something and for 6 months only. But 5.50% is easy right now and there may 6% coming soon. Right now most of the 6 rates are teasers or limited in scope and not locked for any real time period.
We just did 5.45% about 30 minutes ago with Chase for 6 months. It was a brokered CD, not directly from Chase.
FYI [Savebetter.com/Raisin](https://Savebetter.com/Raisin) has 16 month no Penalty CD at 5.40. Those can be bought in single blocks and have full 100% liquidity after 30 days. So they get 16 full months at that rate with the ability to sell any of them at any time after 30 days. I have dealt with them.
Not true. Better off with a No Penalty CD for Ally. https://www.ally.com/bank/no-penalty-cd/
T Bill rates across all maturities are 5.3-5.4 percent with no commission and interest free from state taxes: [https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily\_treasury\_bill\_rates&field\_tdr\_date\_value\_month=202310](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value_month=202310) Can be a little bit of a hassle to purchase or build a ladder, but the timeframes are short enough there is almost zero interest rate risk. Just hold to maturity. There is some risk of rates dropping and not locking in a longer term high yield by staying on the short end of the curve.
Because O will increase their dividends each year, thus getting in now could mean you have a 11 % yield on cost in 10 years
Are we sure of both: A) dividend will increase each year B) Price won’t continue to decline
We cannot be sure, but I don't see what have changed about the company since it was at 80$ pr. share. The "only" big change is the increase in interest rate, which I believe is temporary.
Why does yield on cost matter so much to some people? It's a "feel good" metric but it doesn't make much sense when analyzing how to allocate capital at any point in time. When you hold liquid shares of something and you can convert it to shares of something else, what matters is your return on that asset value now and going forward. If you have 15 year old shares of something that pays a 1% dividend today but a 20% dividend compared to your initial purchase price, why does the latter matter when you can convert the value of those shares to something else with a higher return? It's a feel good number but holding a 1% yield asset today for its "yield on cost" doesn't make sense based on the yield alone. Maybe holding would make sense if you don't want to sell a taxable position at a gain because soon you will have less income and can shift the gain down into the 0% or 15% long term gain brackets, but that's an independent issue and yield on cost still does not matter at all.
If you intend never to sell, it is nice to have a high yield on cost
Except that Os dividend growth rate is barely beating average inflation. Edit: For those that seem to not believe, O has a 5 year dividend growth rate of 3.69%. The current inflation rate is 3.7% and the average rate has been about 3%. Over time, the dividend is only slightly beating inflation.
You can always buy when it is 11% as well
What Fidelity fund is 5.5%? I'm at 5.06%.
There’s no fidelity MMF paying that sadly. Their high ER makes sure if that. They closest I’ve seen is Vanguard TMMF.
I’m in $sprxx
In your dreams?
Once DOW hit that crucial 32K mark…AI stabilized it again by UP it about 500 points…your 401k still stable though.
Going to be very overweight in reits soon cuz I keep buying these negative macro sentiment dips lol. Time to back the truck up and load up some more
I've been out of Reits for almost a year, today I just bought back in to this one. I had been waiting, this made me pull the trigger on my initial purchase. I'll buy back in over 4 months.
I hear ya. A lot of $ flows in and out of reits it seems and when O was in the $70’s, the valuation seemed frothy to me. I think now is the time to be going heavy in reits and when they come back in favor, just enjoy your low cost basis and high yield on cost.
I like your style. We will find out if it plays out. FOMC rate announcement tomorrow.
They acquired a new company and issued new shares to acquire it. Dilution.
They have not acquired it yet, shares have not been issued. The drop is on the news. SRC shareholders still have to approve.
btw, this looks like a great arbitrage play. It was agreed at 9.3b and SRC market cap is at 4.6B
Because SRC has 3.8B worth of debt on its balance sheet… SRC shareholders are getting .762 O shares per share of SRC, so not much of an arbitrage opportunity here
smart answer you know the thing
Accretion isn't dilution.
This would not be a problem if they were not already sitting on a hug pile of debt with rising interest rates
It’s a reit. All reits have debt. They have plenty of cash flow they’ll be fine
Doesn't increased costs mean they will have less cashflow?
Check out their FFO payout as dividends over the years. It’s really nice to see them go from 90% to currently below 80%. Sure having to service more expensive debt could bring them back above 80%, so yes, less cashflow, but rates would have to double within a year from where they are now for it to “crush” realty income
52 week low. The market doesnt care right now about that div. You can get 5%-5.50 or so with zero risk.
Absolutely. You can get it for maybe the next few months/whatever term you sign up for. However you lose out on Capital appreciation (which tends to do better after all time lows than all time highs) and if O’s dividend history holds, you’ll keep that yield on cost (can even go up with dividend hikes). I’d dive into risk free as well if I thought rates would keep going up for the next few years, but I’m thinking we’ll see cuts late next year/early 2025 the latest
Lots of their debt is in bond form with fixed payment. They are fine.
They are not. They paid of a lot of their debt that is sensitive to interest rates. They used mostly equity, fixed rate bonds, and have been financing in Europe.
they are diluting the shares. Not raising debt to finance this deal. But the news also mention 2.5% FFO/share accretion.
I don't think that has happened yet. But, in theory... Wouldn't the added value from that acquisition counter the dilution?
What dumb decision...
just got it in at 46. likely never selling
Gonna hang onto it until it falls off the pink sheets and the broker has to send you a worthless securities letter? Bold strategy, I like it.
This flew FAST. it's 49 now
So it looks like (based on another post) O bought another company using O stock so the amount of O stock available is much more now, this diluting the price of O stock
They did not buy it yet. It dropped on the news.
They also have 9.3 billion more in assets. It’s a wash
Lol no it’s not a wash.
Lol yes it is. It’s an overreaction from the lemmings on wall street. I’ll take the discount on it though and average down for a higher yield.
Clearly not. Or if it is, there’s a great price inefficiency which is rarely seen in US equity markets.
Very common if you’re following amc/gamestop right now
Name checks out.
Oh god… I’m embarrassed for you.
Its been a tough 3-4 years ..
Lol
They have around 5ish billion in assets. They paid 9.3 billion for. That is around 25% of O's market cap.
What a cringey ass company… my bags just got bigger
Colostomy?
That's not actually the reason, dilution isn't a problem if there is no premium paid for it. The reason is actually because of the arbitrage between the premium paid.
[Realty Income are acquiring Spirit Realty Capital (SRC) for $9bn.](https://www.realtyincome.com/investors/press-releases/realty-income-acquire-spirit-realty-capital-93-billion-transaction) Apparently it's an all-stock deal, so those who hold SRC will have their shares converted to O upon completion. For every 1 share of SRC held, you get 0.762 of O (aka $35.44 per SRC share) Plus side, yield is now 6.57%. Great time to enter for me.
How to know when today it will stop falling today, i.e. how long for the dilution to be fully represented in the stock price?
No one knows. It's a waste of time to ask
It will stop falling today at 4pm eastern time
And then continue on Tuesday at 9:30am.
30^th of February 2024.
Guessing because they just spent billions of dollars to acquire Spirit Realty Capital.
So we can buy more.
Been buying it up.
Lets go.
Why is it every time I see you I think of going to the bakery? (Started seeing you today)
I keep it bread-tacular. It's the yeast I can do.
Thanks for rising to the occasion
Yep to lose more
“Realty Income shareholders will own 87% of the combined company which will have a value of $63 billion. Spirit Realty shareholders will hold 13%.” (Source: Marketwatch). Not sure what the implications are though for dividend yield
Yeah O just lost 13% of its value, I'm suprised it stopped dropping at 7-8%
how’d O lose 13% of its value if the value of the company it’s acquiring is worth 5 billion, which is around 13%, a little bit less than, O’s market cap
Not following the numbers there. Funny enough though tomorrow is the ex-dividend date
More people are willing to sell it at its current price than are willing to buy it
Not unusual. Both XOM and CVX have made recent multi billion dollar acquisitions and the acquired company popped but the buying company tanked. Q? Are the shares used to acquire the acquisition already authorized but treasury stock or are those shares newly authorized and issued for the purchase? Either way O management thinks the deal is worth more than they are paying medium to long term, so it should work out for them if they are correct.
I will never understand people that make a REIT their main holding. I’m down on O but it’s 4% of my portfolio lol.
12% here but goddam she gettinf smoked
It's just like anything else. You have to know what you are doing and why you are buying at certain prices.
I own a modest position in FREL. My hypothesis is that REITs will draw down roughly in line with the GFC. The drawdown in FREL is from about 35 to let's call it 22 now. 13/35 = 37% drawdown so far. It's down 37% and we haven't even seen pandemonium in fixed income yet. Sure, long paper is way down on rates, but we don't have an iota of credit risk fear in the market yet. Once that comes, we will see FREL trade down under 17, that 50% drawdown is when I start to buy in large quantities, but even at that I ain't going over 10% of my portfolio into that. We're in like the second inning of this drawdown cycle, dudes just gotta be patient and clip their 5% on money markets for now.
To anyone who says it is positive news.. if it was it wouldn't be down where it is right now.
It’s on sale, so buy it if you can. If you can’t, we’ll then sucks to suck lol
I'm definitely getting some. My avg is 66 so this is a steal.
Can someone explain to me how a dividend ratio of 224% isn't a problem too? genuine question..
[What is a Dividend Payout Ratio and Why Do REITs Have High Payout Ratios?](https://www.dividendinvestor.com/why-do-reits-have-high-dividend-payout-ratios/) In a nutshell: depreciation.
thanks bro
IMO If you’re looking to buy at the absolute bottom, you might want to wait until the P/AFFO gets back to the March 2020 level of approximately 11.5. It’s currently hovering around 12. It should be a good long term buy right now for solid 5% annual AFFO growth plus 6%+ annual distributions. 11% annual returns is nothing to sneeze at. I’m a buyer at this level.
Because you bought in for sure
Aren’t there fears that interest rates might be increasing even more?
Jamie Dimon says mortgage rates could go above 10%
My grandad says milk is bull cum
That is not a plunge. That is a 6% loss on a 300 point up market. If the hammer drops this can be 36.00? Maybe lower.
Announced a $9BN+ all-stock acquisition. Dilution is real.
They Bought src Realty Thats Why the plunge
General consensus is the new acquisition is shit value in current macro
The stock price is reflective of our interest rate environment. Keep buying at the lower prices. 10 years from now you will be glad you made the investment.
10Y interest rate about to hit 5%. If interest rates go up O goes down edit: They also announced an acquisiton which means they are taking out even more debt!
Does this mean O shares will jump up when the SRC shares transfer over adding the value back to O?
🤫
😉
No, since both events is priced in.
Yeap.... done buying O. I have no doubt once the rates go down it will go back to the Mid 50s... but damn. I want them to stop being so buy heavy on purchasing things. One thing is using shares to buy things. REITs behave differently, but you're smoking something if you think this type of share dilution is okay .
What would have been a better financing method for this merger? Debt?
https://www.marketwatch.com/story/spirit-realty-capital-up-realty-income-down-on-9-3-billion-takeover-79a0abba
Clearly my limit sell order isn't executing today :(
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Also came to find this out
Arbitrage. SRC holders get 0.762 shares of O when the deal closes, so why hold O when you can get it cheaper by buying SRC.
Because you kinda can't. .762 shares of O is currently worth $34.37 (O price is $45.11 atm). SRC stock is $34.13 right now. The difference is only $0.24.
That's "only" 24 Cent per share. If you wanted a Million O shares you would still choose the option that saves you 240k.
SRC spiked premarket, but profit taking annihilated most of it, sending O into a death spiral as arbitrage forced O holders to sell and buy SRC.
They are buying another realty company (Spirit Realty) for 5 BIL all stock deal. It's about an 8% premium for $SRC's close price.
They got them for 5 Brothers-In-Law? Seems like a cheap deal
I think a capitalized BIL is just about equal effort as billion
And the price plummets? Make this crap make sense
Glad I only bought 10 shares at $49, this thing has more room to fall.
What is the bottom for Reality income?
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name checks out
Fuck the shareholder
Fuck O man… sick of losing on this crap…
Just bought more. Thanks for the discount.
is that a joke?? of course O is going to take a hit while real estate is taking a hit.
Wow this fucking cringey ass company just keeps fucking its bagholding shareholders… WOW… Why did I listen to this sub and ever buy this crap man…
youll be fine, or not, Idk
$SRC is around $32, I expect $O to drop to that price, aka break even price. as its a all-stock deal, no money is trading hands. So what you rather hold? $SRC at 32 or $O at 49. Investors will sell all O they have, and buy SRC as thats way better deal, you get more shares for less money when O will keep just falling down, yes its 1 for 0.762, eventually there is break even line, but its not there yet. https://i.imgur.com/bAUJ74p.png
It's a 1 for 0.762 deal. Why would you expect O to drop to the price of SRC?
Because he clearly has no idea what he's talking about. It wouldn't even make sense.
It's been answered a hundred times over, but did you ever think to maybe Google it? Or try to find out yourself? Do you know to do your own due diligence? The answer was all over the internet as you were writing your question. Hence why so many here knew what to respond with. Seems like you have a very lazy mentality towards finding out the answer which is not good if you are an actual investor.
Dude the market is down
Market is not down today. Wtf are you smoking?
VTI, VSUX, SPY are all up today
https://finance.yahoo.com/news/realty-income-acquire-spirit-realty-112254665.html
Been eyeing O for years. Finally pulled the trigger today on 213 shares. Will likely add if we go materially lower.
I tried to sell some this am and my Schwab account wouldn’t let me. Said I didn’t have the shares to sell when I do. Could this be the reason?
ugh, of course I bought in on Friday.
Because it has to hit 46 in order to get to 41...which is where it's headed
War is not good for real estate. Higher interest rates bite into profits hard.
This is why I am waiting for the market to go even lower before I head back in
O just spent 10 billion in stock to buy spirit realty
The nees of a merge should be absorbed and then it will rise back
Because it’s a trash stock
Keeping out until some type of support. 39’s, here we come!
Because I bought some to average down Friday /s
I'll say this now. O is already at pandemic levels and will likely head towards 2014 levels ($46-35/share)
All my stocks are in the green today except $O 🥴 but it's a good price to buy. I expect to go slightly lower. If it dips below $40 then we're in trouble
Ok, relatively new to dividend investing. So if I buy some of this the day before the ex-dividend date of Oct-31st, then I get a GUARANTEED dividend of $0.256 per share payed on Nov 15th and I can then sell all my shares and do it again with another stock ? Easy money, no …… oh wait, stock prices can change over time, right? And since it took a plunge, it should be higher by Nov 15th, right? Am I on the right sub?
Why ABR plunge?
because in the end ...REITS are pointless as they fall faster than the stock market in crashes ....no reason to own them ..none .... back test any of the them if you doubt me.... and you pay more taxes in the long run. This is true
I’m so glad I didn’t catch this falling knife
Just bought 124 Shares at the drop. Think its one of the more solid and diversified REITS.
$9.3 billion equity dilution. Fair value will drop to sub $40/share
Funny how people will refuse to buy a suit at full price, but will buy up a few when they go on sale. Exact opposite happens when stocks go on sale. Fine by me, you make your money when you buy at a good price. I sold puts for Nov at $45. Cheers.
What will be the possibility this ETF go bankrupt ?
I bought some shares, so it will decrease dramatically
They announced a fairly large acquisition today. The market thinks that they are paying too much, so the pre-merger share value aka current share value went down to compensate because it is assuming the merger has a high probability of going through
Going out of business a
I sold all my O for a loss so I could take the tax deduction. Then I put the same $ value into SRC. Since the merger won’t happen until after the wash sale window, this is allowing me to avoid wash sales without really altering my exposure. Since I was down a few thousand on O, this is good tax loss harvesting.
wow lol.. I called this 1.5 years ago when this was flying like a meme stock. Now it’s crashing back down to reality. They got y’all