DNP offering Win, Win
A case for DNP offering, anyone with other ideas about the future?
DNP NAV is now at or about $8.63 if the formula price is "less" than 112% of NAV...about....$9.66. No person has a crystal ball... but I can't see DNP dropping that far anytime soon. Only if that happens and "only then" would the offering price 1 for 8.... be 112% above NAV.
The 112% would be the offering price only IF the average market price of DNP for four days prior to the week ending Sept 21 (expiration date) is NAV or less ...not likely!
As I see it the benefit to DNP holders of record Aug 23rd are two-fold..1. WIN..2. WIN
1. (DNP.R) rights will have gain value until expiration day...anytime before expiration date, owners of DNP can sell your rights DNP.R (everyone gets 1 right for every 8 shares held on record date (Aug. 23rd) at DNP.R market value, for cash!
I happen to own 10,000 shares of DNP so that gives me 1250 rights (DNP.R). I can see DNP.R as high as $8.00 or $9.00 before expiration day why not those rights are still a discount to market price.
2. Or if you like you can exercise your rights (buy DNP)...one share for every 8 you owned on record date before expiration date... at 112% above NAV unlikely OR at a 10% discount (90%) of formula price more likely.
let's say DNP's formula price is around 11.00 per share. I would then be able to purchase 1250 shares of DNP at a 10% discount or $9.90 cents a share not a bad deal.
As I see it...the rights offering is very good for DNP owners of record and not so good for outsiders..this is a bonus offer to owners of DNP...the only people being hurt as I see it are people who purchased DNP at or above 11.00 dollars a share...and that hurt I believe will be short lived.
As I understand it DNP has done this once before in the early 1990's yep DNP took a dip short term... but DNP then became stronger in the long run as we have witnessed. I believe DNP's board is very wise they have leveraged highly during times of low interest rates, and now is preparing for higher interest rates in the distant future by acquiring cash with this offering. Wise move in my estimation.