still learning:
I think you are on to something with your analysis of the limits on outstanding shares of SFE and the impact on rights offerings. Most of SFE's investors are individuals, not institutions. Most of us want the excitement and potential of owning these new companies, not the potential "dividend" stream they could be (otherwise we would have taken $7 for OAOTR rather than holding to now have about $0.50 net profit or so).
If SFE as a stock changes to become as "institutional" type stock, I think we could all be in trouble. Institutions would probably not want to keep the (smaller) holdings in new companies, but would gladly take the cash for rights. This would depress the prices of the new companies in the short term, and may even affect future rights offering prices (now usually $5) negatively in the long term.
On the other hand, though, I think the above would be the only way that the stock would go from trading around its NAV (also its "fair risk-based value" according to the CAPM -- see my next post) to trading at a "fully valued" price. Which comes first, I don't know, but one would drive the other. So, in my opinion, we will pick up institutional holders if the premium remains for an extended period.
I am not sure this would be in the best interests of individual shareholders, or the direction Safeguard wants to take their company.
--John |
