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Msg  535576 of 551737  at  12/3/2023 11:01:08 AM  by

Ed Ajootian

The following message was updated on 12/3/2023 11:04:47 AM.

SRV Rights Offering -- Does The Weird Trading Present a Good Buying Op?

  NXG Cushing Midstream Energy Fund (SRV) is in the middle of a rights offering where they issued 1 right (which is tradeable) for every share of stock outstanding as of 11/21, and until 12/13 you can buy 1 share of newly issued stock for every 3 rights you own as of the date of exercise.  The exercise price is the greater of:  1)  92.5% of the stock price, or 2)  88% of the NAV.
 
The stock has been trading pretty weirdly ever since they issued those rights.   Most recently, the stock price popped 5% on pretty decent volume, giving the rights an intrinsic value of $.88 per share.  Yet the rights closed Friday at just $.33 per share.  Not sure what to make of this.  
 
I believe that, in a rights offering for a stock with more float, the arbs would get involved at this point and buy the rights but then immediately short-sell one share of the stock for every right they bought, but SRV only trades 28K shares a day so the arbs probably don't see this as an opportunity worth pursuing.   Unless I'm missing something here it would seem that the rights look like a great investment opportunity at this point.  I would buy more but I already own everything I want to (having bought a bunch of rights $.30 a few days after they opened for trading). 
 
 


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Msg # Subject Author Recs Date Posted
535885 Re: SRV Rights Offering -- Does The Weird Trading Present a Good Buying Op? Willitsoar 0 12/4/2023 10:05:31 PM




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