# Firm capital MIC (FC.TO)



## gibor365 (Apr 1, 2011)

What the hell happened with FIRM CAPITAL (FC.TO)? TDW shows change -100% and Market value = 0?


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## HaroldCrump (Jun 10, 2009)

I see a closing price of $12.27.
Nothing seems to have happened. Day's trading range was $12.25 - $12.33.
The quote in TDW must be wrong.


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## gibor365 (Apr 1, 2011)

12.27 that what TMX.COM is giving.... when i pointed on the link in TDW, I got message Halt trading. 2nd time it dissapear....


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## HaroldCrump (Jun 10, 2009)

Yes, there has been a post market trading halt been issued for this at 16:38 pm EST
It seems they are issuing more equity at $12.10.
The underwriting is led by your TD Securities ;o)


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## gibor365 (Apr 1, 2011)

Looks like the reason below..... How it gonna affect the stock?
_Firm Capital Mortgage Investment Corporation Announces $21 Million Bought Deal Financing
24 minutes ago by Marketwire Canada - NFD
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES 

Firm Capital Mortgage Investment Corporation (the "Corporation") (TSX:FC) is pleased to announce that it has entered into an agreement to sell, on a bought deal basis, to a syndicate of underwriters led by TD Securities Inc., 1,700,000 common shares (the "Shares") at a price of $12.10 per Share (the "Issue Price") for gross proceeds of $20,570,000. The Corporation has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional 255,000 Shares at the Issue Price. Should the over-allotment option be exercised in full, the total gross proceeds of the offering would be $23,655,500. 

The net proceeds of the offering will be used to repay indebtedness and for general corporate purposes. 

The offering is scheduled to close on or about January 28, 2014, and is subject to regulatory approval. 

This press release is not an offer of securities for sale in the United States. The Shares being offered have not been and will not be registered under the United States Securities Act of 1933 and accordingly are not being offered for sale and may not be offered, sold or delivered, directly or indirectly within the United States, its possessions and other areas subject to its jurisdiction or to, or for the account or for the benefit of a U.S. person, except pursuant to an exemption from the registration requirements of that Act. 
_


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Yes, there has been a post market trading halt been issued for this at 16:38 pm EST
> It seems they are issuing more equity at $12.10.
> The underwriting is led by your TD Securities ;o)


Yeap, I found it.... but what this means for the stock ?! Would it go down to 12.10 ? I really don't understand all those underwriting stuff


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## HaroldCrump (Jun 10, 2009)

gibor said:


> How it gonna affect the stock?


Usually stock drops to issue price, or just below.
In this case, $12.10.
It seems to be a rather large offering, over 10% of its current market cap.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Usually stock drops to issue price, or just below.
> In this case, $12.10.
> It seems to be a rather large offering, over 10% of its current market cap.


I remember SRV.UN did similar thing last year (BMO was underwriter), and yes stock dropped to close to issue price, but after couple of months headed higher to 52 weeks high.... Maybe it's a good opportunity to add some shares?


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## HaroldCrump (Jun 10, 2009)

You already hold FC?
It seems to be a pure yield play. It pays out 100% of its earnings.
Is that the basic idea?


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## gibor365 (Apr 1, 2011)

FCF payout at 60%
http://www.theglobeandmail.com/glob...ught-in-yield-hunters-sights/article15301200/


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## HaroldCrump (Jun 10, 2009)

FCF is a tricky metric to use as a basis for dividends/distributions.
Usually, they are writing off something, such as depreciation of plant/equipment/assets, or leveraging tax loss pools to generate the payout.

I don't know the specifics about FC, but a quick look shows steadily declining EPS YoY while at the same time increasing equity dilution and increasing debt.
EPS has fallen from $0.91 to $0.74, while shares outstanding has increased from 14.5M to 18.13M, and debt has increased from $23.5M to $118M.

For a company with a $223M market cap, an outstanding debt of $118M is not a good thing.


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## GoldStone (Mar 6, 2011)

This stock doesn't retain any earnings. It pays everything out. This is by design. This is like a bond... the stock price is not supposed to appreciate.

Jason Donville discussed this stock on his last Market Call. Start watching around 2:30.

http://watch.bnn.ca/market-call/market-call-december-2013/market-call-december-24-2013/#clip1061548


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> EPS has fallen from $0.91 to $0.74, while shares outstanding has increased from 14.5M to 18.13M, and debt has increased from $23.5M to $118M.


EPS for last 10 years was steady, all Q Earnings in range of 0.22 - 0.27, and last Q's 0.25....*maybe you forgot to add last Q).
and btw, where do you find historical shares outstanding?


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## HaroldCrump (Jun 10, 2009)

gibor said:


> btw, where do you find historical shares outstanding?


It is available on many finance websites.
I got it from here:
http://investing.money.msn.com/investments/financial-statements?symbol=CA:FC

The above link has the numbers until the end of 2012.
But the number of shares issued increased again in 2013.
I got those from here:
http://investing.money.msn.com/investments/stock-balance-sheet/?stmtView=Qtr&symbol=CA:FC



GoldStone said:


> This stock doesn't retain any earnings. It pays everything out.


...and then some, it seems.
I watched the BNN video clip. Donville's comments are high level and generic in nature.

If you look at the financials, they are clearly funding their distributions via net new equity issues and debt issuance.
That is where that FCF number is coming from, not from their earnings.

Looks at the CFS as below:










There is a steady and continuous issuance of either stock or debt, or both.

This latest announcement is yet another step along the same lines.
This time they are issuing $23M, which is more than 10% of their market cap.

If their business model is to borrow at the long end, lend at the short end, and keep recycling their short-term loans, then why are they having to issue so much equity?
They might be planning a large acquisition, of course. I don't know the details of the company.
But just looking at the numbers, it seems they are funding the payouts from debt and equity.

Such stocks have done very well in the last 5 years because of yield chasing (or as Donville said : _appetite for yield_).
The market has been happy to ignore how distributions are being funded.


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## james4beach (Nov 15, 2012)

What's the story with this thing? Is anyone tracking FC ? It has a dividend yield of 7.2%

I would imagine that this can keep paying out its dividend as long as the Canadian real estate and mortgage markets remain strong. If the RE market tanks, I suppose this stock would as well.


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## birdman (Feb 12, 2013)

Did a quick look at the business and it is simply a MIc (Mtge Investment Corp) and raises funds through equity shares, debentures, bank loans, etc and lends the funds out as a secondary lender. Their earnings are based on the spread between their cost of borrowing from the debentures and the bank. Of course the cost of the shares is zero. The funds are invested in real estate loans and projects?? (I didn't check) and the companys earnings are simply a result of the interest rate spread between their cost of funds (debentures and bank loans) and the earnings on the the loans. The higher they can leverage on borrowed funds (not equity) the higher their earnings. To put it another way, if there were no borrowings, their cost of funds would be zero and they would earn say 9% plus fees on mortgages. Deduct their overhead and what is left belongs to the shareholders. If they leverage this through bank or debenture costs of say 5% they make another 4% on the funds borrowed. The risk is that as a secondary lender the loans would most likely be non bankable and supposedly carry a higher risk. I am presently invested in a couple of private MIC's and unfortunately have got beat up pretty badly over the past few years due to poor lending practices. Hopes this helps.


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## humble_pie (Jun 7, 2009)

are MICs not generally sold to accredited investors only? seldom or never have any publicly-traded tranche? are therefore beyond the range of provincial market regulators such as the OSC? are not required to publish regular financial statements? have been known - when failing - to disclose nothing for as long as a couple of years? straight-arrow cmffer Berubeland posted an extraordinarily accurate analysis of a failing MIC & their feeble response was to threaten to sue her?

oh dear. They could offer 12% & still folks should run in the opposite direction


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