Quadravest has announced:
North American Financial 15 Split Corp. (the “Company”) invests in a high-quality portfolio consisting of 15 financial services companies made up of 40% Canadian and 60% U.S. issuers. The top five holdings currently held in the portfolio are as follows: JP Morgan Chase & Co., Goldman Sachs Group, Morgan Stanley, Wells Fargo & Co., and Bank of America.
The recent extension of the Company’s termination date included a retraction right for Class A shareholders and Preferred shareholders. The Company will not require a rebalance of shares and all retraction rights have been satisfied.
The Company may use the normal course issuer to repurchase Class A shares at or below intrinsic value. The current intrinsic value exceeds $8.00 per share.
As previously announced, the annual dividend rate for the Preferred Shares has been set at 8.75% (subject to a 5-year minimum of 7%). The dividend policy for the Class A Shares will remain at the current targeted rate of $0.11335 per month, or $1.36 per annum.
This retraction potential existed due to the extension of the fund’s term, which came with special retraction provisions.
As IrateAR remarks, the Capital Units have shown:
crazy price moves in that one the last few days.
… which may be the reason Quadravest saw fit to issue the above press release – nothing has yet been disclosed for other extended issues DF.PR.A, LFE.PR.B, FTN.PR.A and DFN.PR.A.
FFN showed a 2024-12-11 VWAP of 7.26 on normal volume of a little under 300,000 shares, but on 2024-12-12, volume spiked to nearly 700,000 shares with a VWAP of 7.12. Today’s VWAP was 7.04 (and it closed much higher) on volume of 1.36-million, which is all wild enough.
What makes it stranger is that, as hinted in the press release, the Capital Units are trading below intrinsic value – the NAVPU was 18.29 on 2024-11-29, so it’s easy to believe the claim that the current intrinsic value exceeds 8.00 per share. It’s not normal for a Capital Unit to trade below intrinsic! It is, effectively, a reasonably normal leveraged portfolio that is also long a put option (to the preferred shareholders, at a NAVPU strike price of 10.00) on the whole whack. To trade below intrinsic, Capital Unitholders would have to assign a value to the fees and expenses associated with the fund which, horrendous though they might be, are rarely accounted for.
So … something’s going on with the Capital Units that I don’t understand. Prior to the press release, it might have been uncertainty – a good sized consolidation of capital units would have:
- reduced the projected income of the shareholders, and
- decreased their leverage
both of which are considered undesirable. But, at around 2pm today the share price commenced to skyrocket, from the day’s low of about 6.85 to the close of 7.31; this was well after niagara posted the link to the press release (10:38am; I don’t know the time the press release itself was issued). So who knows? Maybe it was something as mundane as a big investor unloading a hatful of them (or a big retail advisor unloading on behalf of clients). If so, someone sure absorbed a high market impact cost for the privilege of getting out in a hurry.
Coming on top of DFN.PR.A’s high-volume price drop yesterday, it all leaves me quite befuddled!