Firm Capital just announced a convertible debenture last night. Normally when a corporation has an equity or quasi equity issue in this case, the earnings per share are diluted somewhat and the share price falls. In the case of Firm Capital, the stock rose which is very interesting.
I am a shareholder in this company and also have it on my list of companies in my Model Portfolio for my monthly newsletter.
Being an analyst by training, I requested some info from the company in regards to the potential effect of rising interest rates and more stringent goverment rules regarding mortgage eligibility.
The investor relations rep said that he was not at liberty to disclose how they specifically fund their mortgages as this was proprietary information. I asked him if the company benefits like banks do from the steepening of the yield curve where long rates rise faster than short rates. He said emphatically that the company does not factor the yield curve into their lending activities.
However he did indicate that the company is not worried about rising rates or increased government intervention in the mortgage area. He said that the company is involved more in bridge and mezzanine financing as opposed to traditional mortgages.
Currently the stock yields 6.7% and the 1 year total return is 17.5%, quite impressive from an under the radar type company.
November 30, 2016