The underwriters unloaded all (? Well, I don’t know for sure. But a big chunk, anyway!) of their unsold inventory of TD.PR.P today; 819,021 shares (of a 10-million share issue) traded in a range of 24.00-23, closing at 24.10-13, 12×11. I am advised that the blow-out price was $24.00.
I don’t get it. Who, except maybe for those willing to pay up-up-UP for the privilege of buying a big piece, would be willing to buy it at $24.00? Let’s look at a recent comparable – the same comparable I wrote about when I reported on the opening day: TD.PR.O.
| TD Comparables | |||
| Issue | Quote, 11/14 | Pre-Tax bid-YTW |
Fair Value |
| TD.PR.P | 24.10-13 | 5.49% | 24.03 |
| TD.PR.O | 22.20-23 | 5.51% | 22.75 |
All I can really do is repeat the following from my previous post:
Yields are basically comparable, although the TD issue looks expensive even on this basis. So:
- If yields go up and prices go down, old & new will return about the same.
- If yields are unchanged, old and new will return about the same.
- If yields go down, the new issues will get called away just as things start to get fun, while the old issues will rack up big gains.
Doesn’t anybody do scenario analysis any more?
If I repeat myself often enough, maybe enough people will listen that we’ll start seeing more preferred shares issued that actually have a concession to market … or maybe I’ll just be dismissed as a crank. You can never be sure…
There would obviously be a liquidity premium for being able to buy several hundred thousand shares in one transaction. Trying to buy the better investment TD.PR.O in similar quantity would be very market moving, if not impossible.
This is one of the rare cases where the small investor can be more nimble than the large institutional investor (I assume it was an institution with $20+M to invest!).
Yesterday’s trading was an inventory blow-out; I don’t have the actual trading statistics, but whenever I looked there were a lot of lots changing hands in the 1,000 – 4,000 share size range. There were an awful lot of trades.
[…] Recent inventory blow-out. Now with a pre-tax bid-YTW of 5.50% based on a bid of 24.03 and a limitMaturity. […]