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Post by dougj1 on Jan 27, 2023 17:20:52 GMT
Just looking at my Schwab account and saw the Rights offering with record date 1/23/23 and expiration date of 2/16/23.
I have never experienced a Rights Offering before. Purchase 1 share for each 3 rights held. Can anyone help on what to do.
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Post by marpro on Jan 27, 2023 17:29:54 GMT
I used to invest in KIO, not anymore. Permanent discount and higher yield. But, in my opinion, new shares will only dilute its value - 92.5%. Subscription Price will be 82% of the Fund’s NAV. The distributions represent an annualized distribution rate of 12.53%.
The existing customers may get out. Perhaps, they have more funding to expand, but I doubt with this interest rate environment. This seems to be very similar to what CLM did last summer. It was diluted, and it is even in worse shape. I will not jump into that. It is just me.
Add/Edit: I was able to buy CLM at a price even lower than the Rights offering in the summer. It was not worth keeping it and got rid of it for a small profit. Now, it is in worse shape than it was back in summer. But, KIO is a loan-type and wants to compete with other similar ones, artificially increasing the yield.
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Post by steelpony10 on Jan 27, 2023 18:14:57 GMT
Just looking at my Schwab account and saw the Rights offering with record date 1/23/23 and expiration date of 2/16/23. I have never experienced a Rights Offering before. Purchase 1 share for each rights held. Can anyone help on what to do. |
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Post by dougj1 on Jan 27, 2023 22:27:31 GMT
Thank you for the replies and information. I now have a better understanding of the process. As KIO is one part of my income section I plan to use the rights offering and acquire the available shares. Thanks again
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Post by marpro on Jan 27, 2023 22:48:54 GMT
Thank you for the replies and information. I know have a better understanding of the process. As KIO is one part of my income section I plan to use the rights offering and acquire the available shares. Thanks again
Good luck. I will be interested in knowing how it goes next May/June – specifically, if the price went up or down from your purchase price.
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Post by Deleted on Jan 28, 2023 1:06:23 GMT
dougj1 --- In addition to the helpful advice steelpony10 has provided (which he so often does) about CEF rights offering, note a primer on this at seekingalpha.com/article/4112887-primer-what-is-cef-rights-offering-utg-case-study , detailed enough to possibly cause a headache. And, as usual, some of the reader comments to the article are helpful too. As for the current KIO rights offering, there's an analysis of this ... which I don't want to copy here because it is from a paid service. But I will note from it .... that the offering is likely to be very dilutive and thus, if you do want more shares, offset the effect of the dilution by subscribing to maximum amount possible. --- Frank |
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Post by johnsmith on Jan 28, 2023 13:14:19 GMT
dougj1, The rights are also transferable. So they can potentially be sold in the market. I also think it's 3 rights = 1 share. (going from memory so could be wrong.)
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Post by yogibearbull on Jan 28, 2023 13:30:25 GMT
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Post by Chahta on Jan 28, 2023 13:56:11 GMT
So is this rights offering for KIO a way of increasing capital in a CEF? Will it affect its leverage?
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Post by yogibearbull on Jan 28, 2023 14:20:17 GMT
So is this rights offering for KIO a way of increasing capital in a CEF? Will it affect its leverage? Rights-offerings are indeed a way for CEFs to raise more capital. It may be a defensive step by KIO to raise capital before it gets into regulatory debt issues/limits that could cause forced-deleveraging. But my guess is that once the new capital is raised, it will lever up to its previous leverage. That need watching. www.cefconnect.com/fund/KIO |
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Post by marpro on Jan 28, 2023 14:38:43 GMT
I recall that KKR raised capital last year too and bought some assets. I believe that KKR borrowed in the market. So, its NAV went down and down. It is a lot more complicated than it looks. Here is a comparison chart of KIO with PDI and PTY. PDI has gained 15% over KIO for a reason. Compare KIO with PTY – comparable CEF. It has gained over KIO by 18%, and goes at a heavy premium for a reason.
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