{"id":368,"date":"2006-12-06T22:43:31","date_gmt":"2006-12-07T02:43:31","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=368"},"modified":"2006-12-06T22:43:31","modified_gmt":"2006-12-07T02:43:31","slug":"strange-strength-in-sxtpra","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=368","title":{"rendered":"Strange Strength in SXT.PR.A"},"content":{"rendered":"

What’s up with this issue? It’s not in the HIMI Preferred Indices (at the moment, anyway) due to volume considerations, but today it traded 41,832 shares and closed at 25.90-95, 78×20. AND it went ex-dividend today<\/a>. Maybe to you and me, that means the price should go down, but not this time!<\/p>\n

What makes this strange is that the pre-tax YTW on this issue is now -4.66% [that’s NEGATIVE 4.66% if the word-wrap on your browser is misbehaving!], based on the bid of $25.90 and a redemption call 2007-4-14 at $25.00. If it lasts until its scheduled hardMaturity<\/a> 2011-3-15, then it will have yielded +4.76%, but just how likely is this contingency, anyway?<\/p>\n

When we look at the financials, available via Scotia Managed Companies<\/a>, we find the following history of units outstanding:<\/p>\n

\n\n\n\n\n\n\n\n\n\n
SXT.PR.A Units Outstanding<\/td>\n<\/tr>\n
Date<\/td>\nUnits<\/td>\n<\/tr>\n
Issue, 2001-3-12<\/td>\n7,500,000<\/td>\n<\/tr>\n
2003<\/td>\n-107,540<\/td>\n<\/tr>\n
2004<\/td>\n-492,059<\/td>\n<\/tr>\n
2005<\/td>\n-2,161,719<\/td>\n<\/tr>\n
2006<\/td>\n-3,202,804<\/td>\n<\/tr>\n
Remaining<\/strong><\/td>\n1,535,878<\/strong><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Which in the first place goes a long way towards explaining why the issue no longer qualifies for index inclusion on volume considerations and in the second place demonstrates that the capital unit holders aren’t exactly shy about redeeming units. Scotia says that the SXT Capital Units had a NAVPS of $19.61 as of December 5 … the market didn’t do much today, so say that’s constant … SXT closed at $19.23-84, 40×50.<\/p>\n

There will always be those who disagree, of course, but it seems to me that the increase in the Capital Units’ intrinsic value from about $17 last March to the current figure, together with the fact that the Capital Units were trading at a discount to intrinsic value of about 7-8% immediately following the last redemption, that has now been reduced to about 2%, makes the probability of redemption extremely high. Scotia has a great little feature on their website<\/a> whereby a user can plot the intrinsic value and the market value and the discount over time. Have a look. Same pattern: discount goes to about 8% following the redemption period, increases gradually to about the current figure, then there’s a whacking great redemption.<\/p>\n

Given that, I wouldn’t be paying $25.90 for these shares!<\/p>\n

As I’ve said before<\/a>, the world would be a better place if more split share corporations’ preferred shares had some degree of call protection via premia on early-call prices.<\/p>\n

I’ve attached two graphs of data over the past year: Flat Bid Price<\/a> and Yield-to-Worst<\/a>. Check the glossary for explanations of flatBidPrice<\/a> and yieldToWorst<\/a>.\n<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

What’s up with this issue? It’s not in the HIMI Preferred Indices (at the moment, anyway) due to volume considerations, but today it traded 41,832 shares and closed at 25.90-95, 78×20. AND it went ex-dividend …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-368","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=368"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/368\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}