Nice review of earnings - check out my post from earlier this year. Earnings seemed fine and, thinking long term, I’m not worried given the organic growth embedded. I do wish leverage was a tad lower. The pref is great and while you give up upside should it go above 80 you significantly lower your downside. If the stock goes nowhere for the next two years (unlikely) you still make 15 percent irr
I looked into the economics of this a while ago, but got to the conclusion that it really doesn't make sense because you can miss on quite a bit of the upside (but the economics might have changed and would have to look closer)
Nice review of earnings - check out my post from earlier this year. Earnings seemed fine and, thinking long term, I’m not worried given the organic growth embedded. I do wish leverage was a tad lower. The pref is great and while you give up upside should it go above 80 you significantly lower your downside. If the stock goes nowhere for the next two years (unlikely) you still make 15 percent irr
Will do thanks for flagging!
Always a pleasure to read you. Great job, we have the same opinion. I will look an arbitrage with pref
Thank you!
Any thoughts on owning preferred shares (FOUR.PR.A) instead regular shares?
Preferred will covert into 1.224 regular shares in May 2028 if share price is under $81.81 and above $28.63.
And it pays $1.50 div per quarter (7 remaining until conversion for $10.50)
N.B. this will increase share count in May28 but stops div payment of $15M/q
I looked into the economics of this a while ago, but got to the conclusion that it really doesn't make sense because you can miss on quite a bit of the upside (but the economics might have changed and would have to look closer)
Napkin maths:
Reg shares = $42.50
Pref = $55.50
So $5,550 buy you 100 prefs = 122.4 reg in May 2028
$5,550 buys you 130.5 reg now
So you are losing 8.1 shares
But will gain $1,050 in dividends
So if reg share price remains between $28.63 and $81.81 and you get 1.224 shares, you'd be winning.
Near $100 you would get 1:1 so then you'd lose vs regular shares...
makes sense will look into this thank you JF!
Last time I checked liquidity and spread are bad so you'd probably lose 1-3% on conversion between shares.
Yes there can be a significant bid/ask spread.
Very common for preferred shares
It was a pleasure to read your article. I wrote my take on Shift4's Q2 results as well and shared your article for others to read as well.
“The company suffered by far the worst stock reaction despite payment companies lowering the guide across the board.”
Not all! Toast raised guidance. To be fair, they are a payments/software company, which is why I own them.
Of course not all