On this page folks should comment and write about illiquid securities–preferreds and baby bonds. By Illiquid I am talking about those issues that seldom trade–or only trade in very small volumes.
We have a lot of discussion on the site about these types of securities–normally $50 and $100/shares issues and the commenting gets scattered about–by using this page we can keep this topic more centralized.
A caution to all investors, but in particular those will little experience in illiquid securities. Tight limits must be used on all of these securities–if you don’t use limits you will butchered. Also while some of these issues have been outstanding for more than 50 years they can still be called–it happens and if you overpay (pay more than liquidation price) you may be setting yourself up for a loss. Always do your own due diligence–always double check the facts–everyone makes errors (certainly I do) and you need to know the facts.
Investors should know that illiquid securities will drop like a rock if there is a large move higher in interest rates. One of my current and long time holdings has been a $50/share issue from CEF Tricontinental (TY-P or TY-) with a 5% coupon–very high quality. This issue is now trading around $56, but in its life (issued in 1963) it has traded as low at $18/share–so there should be no doubt they can move sharply.
I cashed out of MSEXP. Good luck to all remaining holders.
Now I have to wait and see if kaptain lou’s SEC police come looking for me I guess.
Wow, such a financial run on MSEXP this week. Starting at $115 on Monday morning and then running up to $500 in a such a few days. The security had not been traded in a long time. Well done -if the funds are not clawed back.
Tonight I sent a formal complaint to the SEC for a Pump and Dump scheme and manipulation of an illiquid security. They may have evidence that a party named as “James” has been doing this on message boards for a number of years.
Links to message boards please.
So are you saying MSEXP does not convert into 12 shares of common stock? Because if it does (as the SEC filings quoted here seem to indicate) then it is still underpriced.
And when you say “They may have evidence that a party named as “James” has been doing this on message boards for a number of years” would that be “evidence” you supplied them in the past?
I would not take kindly at all to being misled, but I have no reason to think that happened here. Now is your chance to provide any evidence you have to the contrary. Pump and dump requires someone to knowingly make false and misleading statements. I would very much like to know what you are contending those statements were.
Jim, Normally it’s difficult to run a pump and dump scheme by a 1 man show. Usually a coordinated effort between a group of people.
I have the honor of having been named as one of Grid’s partners in a supposed Pump & dump Scheme for CNIG and it’s preferred.
I wear the badge with honor bestowed by the same person.
BTY, I own no MSEXP never have and never will considering the current price. I don’t keep this message board open on my cell with alerts so I missed the fun.
Jim:
My guess is that anyone who bought and sold MSEXP this week (including myself) will eventually be contacted by a regulator (even if party spoiler Kaptain Lou had not filed his complaint with the SEC). The advance in the stock price will shoot off alarm bells.
I worked at a $100+M hedge fund many, many years ago and we would dabble in illiquid securities from time to time (nothing as illiquid as MSEXP, though) – and we got hit at least 5 times from the SEC inquiring about trading violations when these securities would zoom in value and we would sell. They never succeeded as we always backed it up with homework, but it was a huge pain in the butt dealing with them. And the profits we booked were miniscule compared to what some of the readers on this site have realized in MSEXP.
So I would HIGHLY encourage anyone who has traded in this security this week to save all the posts from this MSEXP thread here on III, and particularly those posts showing that the value in MSEXG was determined by good old-fashioned homework and from readers posting communications directly from MSEX’s Investor Relations office.
You will likely be glad you did…better safe than sorry!
Kid,
ref. your last few sentences. I’ve read this thread now 3 times. I can’t for the life of me figure out how anyone can read about the past week’s events regarding MSEXP and how board readers acted and reacted and feel some type of fraud, or misrepresentation was underway. I came away in awe and very impressed with those willing to dig and share their findings about a security that, lets face it, didn’t need to go viral to make money for someone due to the conversion nature of it; furthermore to post what correspondence they received from brokers and actual company officials. Just my admittedly layman opinion on this whole thing.
I acknowledge the situation is bizarre so I can understand how the MSEXL story makes people wonder. This is a very unique situation – one of those situations that seems obvious in hindsight.
With that said.. everything posted on this board checks out, plus I verified the conversion amount directly with the company. If I end up losing $, then that’s on me.
It’s also interesting to see that the liquidity gets more and more thin as the days progress. This checks out with the speculation that ~5,000 shares were released onto the market recently – causing this whole run. If this were some sort of scheme, then more shares would be available.
Happy 4th!
The person that should be investigated is the broker/advisor who sold 4,786 shares at $92-$95 on June 18th.
Talk about an “oopsies!” 🙊
Well also maybe the one(s) that bought at $92 and then in turn took the quick 10%-15% ish and ran, lol.
Maine:
I agree everything seems to check out. But when a security with 10,000 shares outstanding that barely trades in an entire year advances 400+% in a few trading days, then regulators will likely take notice.
All I’m saying is that this has happened to a firm I was involved with in the past and we got investigative calls from the SEC. But I don’t think anyone who bought and sold has anything to worry about. I’m certainly not worried, but I’ll make sure all my ducks are in a row. And this security could certainly be too small for the SEC to even bother with it.
But I was definitely a little alarmed by this comment posted by Grid:
“Gridbirdsays:
07/05/2024 at 7:36 am
Well also maybe the one(s) that bought at $92 and then in turn took the quick 10%-15% ish and ran, lol.”
Not sure trying to insult and poke fun at people who decided to take profits too early (some certainly on this website) is the way to go. Normally Grid is way better than that. Definitely shows that all those once-in-a-lifetime fluke profits earned on MSEXP might not have done much to improve somebody’s character? A comment like that implying that folks were stupid to sell too early (considering that MSEXP was probably the most bizarre situation in the history of preferred land) just really doesn’t belong on this website.
I mean how about the poster who sold all 200 shares at $160 that were purchased for $100? You never go poor taking $12K in profits, but they left $70K on the table. You think he/she feels good about that? Way to rub it in, Grid.
Just be careful, Grid…karma can be very painful at times.
Kid, I didnt mean it that way. See I was joking at myself too. I have held these before in the past and sold and thought I was making out good too. Because I have been a “92” type seller before also. Not only once…but twice! But I didnt know either. Without the help of people here, explaining what I actually have, I would have been fleeced a third time without question.
I hear you Kid. I don’t think Grid meant it like that.. I know I had a bid in for it a couple of weeks ago at $95 and it never it. Had it hit, and subsequently went to $105 or even $100, I would have sold as quick as possible. These illiquids can be inefficient and I would’ve simply thought someone was over bidding for it. All good..
BTW, I also have another email to the company to get some more specifics on the restrictions. Will forward upon receipt.
Maine and Grid:
My apologies if I interpreted anything incorrectly.
Maine – regarding your comment:
“Maine says:
07/04/2024 at 8:57 pm
The person that should be investigated is the broker/advisor who sold 4,786 shares at $92-$95 on June 18th.
Talk about an “oopsies!”
As was previously mentioned, that seller was very likely an Administrator for an Estate who couldn’t really be expected to know about the conversion ratio. Those 4786 shares were likely held for many years by the original owner who passed away. But I spent a good portion of Sunday, June 30th thinking about the 12-to-1 ratio that the amazing detectives like Dick Whitman, Grid, Ken, etc. came up with over that weekend. Even at the golf course!
I just couldn’t get my head around how that holder could own half of the shares outstanding and not know about the convertible feature. I assumed that holder paid $100/share (or even less) for MSEXP given how that security traded by appointment for decades.
When MSEX common traded for $100+/share in early 2022, not converting to common cost that holder $5.2 million in profits ($1100*4786). Even if they thought the conversion ratio was still only 3-to-1, it would have been nearly $1M in profits ($200*4786). How could somebody with so much money invested in MSEXP and owning so many of the shares outstanding not know? Just truly bizarre and an ultra expensive lesson in “know what you own”.
That is the real “oopsie” here. That is life changing money for many folks!
Kid – no doubt, there will be an article written about this once all said and done.
Matt Levine, Jason Zweig, or maybe even an odd lots episode with Tracy and Joe Wiesenthal. As long as it isn’t any schmuck from SA! Haha, jk there are some “not horrible” authors there.
As expected, liquidity has dried up! Now we wait..
If I had to bet, it was just an executor of an estate selling everything and if the shareholder was elderly, not converting the shares when the parent was over $100 a share is almost expected.
True Story.
One of the lawyers I met at a CLE had some clients in rural WV walk into his office with a shoebox they found under the bed in their mom’s mobile home.
They thought they hit the jackpot with a $5000 Raytheon bond.
But it wasn’t $5000 dollars. it was a stock certificate of 5000 SHARES and the mom was a retiree of one of their factories and living off the dividends.
But that stock certificate was issued in the 1980s, so the lawyer checked and saw there were two stock splits in the 1990’s, and those shares were in DRS form.
She owned a total of 20,000 shares worth $1.6 MILLION.
K.T.,
You’re out of line. Your back-stroking notwithstanding, your indelible comments are inappropriate:
“I was definitely a little alarmed by this comment posted by Grid”
“trying to insult and poke fun at people”
“implying that folks were stupid”
“Way to rub it in, Grid.”
“karma can be very painful at times.” (I mean – that’s a threat)
At a minimum – none of us needs you telling others how to think and act. On a more offensive level, your agenda is thinly-veiled.
Grid has offered more to this community than many other posters combined. He has generously tutored, instructed, shared and probably made readers a lot of $$ over the years by through his limitless insight and keen observations regarding preferred-land. The MSEXP episode is only one of many, many similarly astute observations over the years.
Your writing style looks familiar and I cannot help but wonder if you’re an old provacator with a new handle.
Regardless, suggest you back-off and re-consider where you fit in the stack here.
alpha:
I already apologized to both Grid and Maine for my incorrect interpretation of Grid’s comment. I have complemented Grid numerous times over the years.
As to your comment:
“Your writing style looks familiar and I cannot help but wonder if you’re an old provacator with a new handle.”
You are way, way off base. Not even close.
And no threats were made. Karma tends to come back and bite those who boast and treat others unfairly…and I incorrectly interpreted that is what he was doing. When I’m wrong I say I am wrong.
Adios.
I guess I can write a smooth email. I made sure to butter the bread on both sides. Mrs Sohler emailed me back at 11:30 PM EST. Got a reply in less than 30 minutes. I shared the info with schwab, explained we might have dozens of people doing a conversion that could be expedited if they released info to brokers, and i appreciated her time and efforts.
“Thanks Mr. XYZ:
We have been in consultation with Broadridge who is our current transfer agent and are discussing the steps required as well as a plan to communicate the conversion process with brokers. We concur a letter of opinion will be required of our General Counsel, coordinated through Broadridge, to essentially unrestrict the shares. Some of the information below may need updating and we are conferring with Broadridge on this matter. We will keep you posted. Thanks for sharing the info below.
Regards,
Bernadette M. Sohler, Vice President of Corporate Affairs
“
Thanks for sharing, fc. And if you don’t mind, please also ask them why the hell the MSEXO preferred shares aren’t trade-able anymore and bring them back by popular demand!
Good work FC!
Sounds like they will get rid of the certificate requirement and use a normal process to do the conversion and issue shares, which should be easier for everyone.
Now the difficult choice for me is when to redeem. I have a lot of capital losses (a long story, not from investing choices) I could apply so the calculus is a bit different for me.
That is good news for sure; hopefully this will make the issue of the preferreds being removed from the account in the conversion process and the possible tax consequences for a tax-deferred account go away. I hold in an HSA account, same would be true for an IRA.
I do want to thank all here – I’m glad I checked in a week or so ago after not regularly checking in, I think I need to check in regularly now. Plus I need to donate again to Tim. One thing I learned through this is that I need to open a regular brokerage account at Schwab since Vanguard doesn’t allow trading in these types of issues. As someone said, and I’ve experienced this as well, when you call in to Vanguard they treat you like a child. My call in to Schwab yesterday was handled professionally.
I think we should do a tally of shares owned by III readers. I’m at 160.
Nice work fc. Thanks for your tenacity on getting information about this situation.
I really thought I found some useful information on this website but it turns out it is not very useful at this moment in time. It has all sort of links to forms, FAQ, etc.. if you look it over carefully.
https://shareholder.broadridge.com/middlesexwater/
What some should also consider regarding MSEXP is that its value correlates to the price of the common shares. Since 2021, MSEX has been falling from an all time high, but some monthly technicals may show some promise for it rebounding in the future. No guarantee that even years later that it goes back to all time highs, but it could be a decent enough bounce that I can hold onto my 7% annualized yield right now and wait for a better time to convert. Since it can’t be called, I have time.
Legend remember the 7% yield is long gone. That left the station 2 days ago. You have a 1.56% yield on your preferred now. The preferred is subordinate to the movement largely of the common now. And the common pays 2.56%.
So the math clearly states if that is your goal you buy the common and hold it. Which I am not suggesting you do, just making sure you are mark to marketing what you have and not padding the stats on having your cake and eat it too with yield off cost and raking the mental cap gains now too.
Thats a good point.
Actually MSEX can call 10% of it each year if they so desire but I cannot recall if that is cash value of 12 shares or common.
The true 7% uncallable which has a float of < 1000 shares has no ticker symbol. It appears that one was issued back in the 1960s or 70s. Once again I forget the exact details. MSEX appears to have been using preferred for a very long time.
Great detective work by all of you. fc, what’s the cusip for those 7% shares?
I have absolutely no idea. No ticker symbol. I did not ask MSEX. I do not have access to a bloomberg terminal. I do not pay for specialized information.
I wish I knew! Could have made this all so much easier to figure out.
I just sold 1/6 of my mexp shares and collected over 2/3 of what I paid for all of them. Not bad in my book. Whoever bought them for $460 each, I hope it works out for you. I just couldn’t resist the temptation to get some cash back in the present just in case the conversion thing doesn’t work out in he future.
I think I will wait and see how and conversions work out for other iii owners before I try it.
I hope it works out great for all of us. It sure seems to have a lot of potential.
Basically this is how the price will be determined going forward. People would rather not get into the whole mess of conversion and it is simply easier to sell the preferred. Once information is more well known how it goes the price goes up. If it is truly a pain in the rear the price suffers a bit.
I will bet you a nickel many people are considering doing exactly what you just did. Especially in IRAs.
I am trying to figure out what I am willing to pay for more and frankly I cannot get very excited paying the current ask of 450. Which is odd when you think about it. It still represents a very decent gain if some basic assumptions hold true like being able to sell one day down the road.
fc/New,
I’m out. Sold my 200 shares this afternoon. Would have kept them if not in an IRA. Pig pile Sr is still in the game with his 500.
Roth would be the best place to hold these, for sure.
I am curious if any forum member was collecting more of these shares at prices above 350? Otherwise these shares are even more distributed among even more people. Middlesex is going to get annoyed. 😉
fc, lots of onesies in there, single share transactions. never seen anything like it these last few days.
Pig,
I guess the main reason this was so illiquid is that nobody was bidding the correct amount to draw them all out! So many single shares being sold it is amazing. Creating volume with trades well under 10 shares per purchase.
I find it hard to fathom that all these 1-10 share trades are from people buying it the last few days… or is it just constant recycling/flipping? Who knows.
We are reaching the point there will be very little meat left on this bone if this keeps up.
I bought 2 at abt 400 but sold at abt 480.
Yazzer, $400 actually looking like a decent entry point. However crazy that might sound.
I did get some above $400.
Couldn’t resist not being part of one of the greatest pref trades of ALL TIME.
Plus, the math makes sense.. and everything checks out (so far).
Maine, I gots me some convertible fever baby! Although of the nasty type today. Just landed 200 shares of VNORP today at $45.50. I have played this one before over the years when “office reit” didnt mean disaster. But back in the sandbox today as this has been a good play for me a few times. It like MSEXP is a “live convertible” at 1.9531 shares of common VNO for each VNORP share. So in essence as of today anyways buying $50.78 of VNO for a discounted price of $45.50…. Fun….But aint no MSEXP baby!
Grid – regular Vno prefs are some of my fav positions. They have enough trophy assets to protect the prefs.
That is my hope anyways, too! The other VNO preferreds are certainly less of a hassle to acquire. There are less than 13k shares outstanding of VNORP. It was issued long ago, and delisted long ago also.
On quantumonline, The preferred shares are convertible any time at the holder’s option into 0.68728 common shares of Vornado Realty Trust
How did you get 1.9531 shares of common VNO?
J, that was long ago on a far away distant planet. With these old convertibles they adjust over time to keep from dilution from certain company activities. You always need to go to annual filings of company. VNORP is the Series A. It used to be VNO-A before being delisted. This preferred was issued last century. Here is the cut and paste best I can do to show you from this years annual filing.
nvertible preferred:
6.5% Series A: authorized 12,902 shares/units(2)
0.8125 0.8125
Cumulative redeemable preferred(3):
5.40% Series L: authorized 13,800,000 shares/units
0.3375 0.3375
5.25% Series M: authorized 13,800,000 shares/units
0.3281 0.3281
5.25% Series N: authorized 12,000,000 shares/units
0.3281 0.3281
4.45% Series O: authorized 12,000,000 shares/units
0.2781 0.2781
____________________
(1)Preferred share dividends/preferred unit distributions are cumulative and are payable quarterly in arrears.
(2)Redeemable at the option of Vornado under certain circumstances, at a redemption price of 1.9531 common shares/Class A units per Series A preferred share/unit plus accrued and unpaid dividends/distributions through the date of redemption, or convertible at any time at the option of the holder for 1.9531 common shares/Class A units per Series A preferred share/unit.
(3)Series L and Series M preferred shares/units are redeemable at Vornado’s option at a redemption price of $25.00 per share/unit, plus accrued and unpaid dividends/distributions through the date of redemption. Series N preferred shares/units are redeemable commencing November 2025 and Series O preferred shares/units are redeemable commencing September 2026, each at a redemption price of $25.00 per share/unit.
…” Basically this is how the price will be determined going forward. People would rather not get into the whole mess of conversion and it is simply easier to sell the preferred. ”
That is where I am at now. I am gladly sharing the wealth. Sold a fair amount yesterday around $475, more at $500 and even bigger at $525 today. At $550 anybody can have the last couple hundo of them if they want. All they gotta do is ask…..What a week fellow players!
Closed at $525 today.
I regret not buying any in my 401k account. My shares are in a taxable account. I had no idea this sort of thing or anything close to it was going to happen. I am not sure any of us did. It was my intention to hold until I croak and enjoy a nice yield.
I think I may sell out at $525 on Friday and just pay some taxes. There are worse things that could happen to me.
Congrats! I would do the same if I bot at $100. Since I bought in the 400’s, looking for $550, lol. Still leaving some meat on the bond for someone.
Maine I will give some out Friday when I get home if interested. Just remember the numbers game which I am sure you do. If common would drop to say $40, its only worth $480 a share.
At today’s closing prices of MSEX and MSEXP, I calculate you could sell MSEXP for $525 and collect 82.95% of what the value of 12 shares of MSEX is.
Considering the unknowns of the conversion process, I wonder how close it will get in value. If I sell Friday at $525, I hope the buyer is indeed able to realize the remaining 17.05%.
It seems they are taking some very slight modest risk, and not collecting over an easy 370% to over 420% gain like I did on mine in short order. So they deserve some profits to carry out the process until the end. I still have a couple hundo left too. We will see. If I get $550 I will certainly think about leaving the party for good.
Yup. I have shorted common to reduce that risk.
I think I am in this for the long game for a few reasons. I do not want to pay short term cap gains. That is a big deal in a taxable account. I am willing to take the risk of the common stock going up or down.
It appears to be a very well ran company. I have no idea why water companies were so hot in 2021 and have now come way down to earth. They appear to have growing earnings and a possible take over candidate by someone like AWK?
I am willing to take risk to maximize my profits. It was a risk just buying this above >115 without concrete info due to lousy yield on cost and adding the risk of the common fluctuating is small in comparison.
So who is with me to convert? Do I have anyone to enjoy the ride with?
I’m with you – I plan to convert my 160 shares in a tax sheltered account, assuming I don’t run the risk of the conversion process creating a taxable event by removing the preferred shares from the account. I’m thinking (hoping, really) that Middlesex streamlines the process and it can be done within the brokerage account.
Well.. step one is to collect that nice preferred div due to us in a couple of weeks and allow MSEX to get their house in order. No point worrying about anything right now I suppose except MSEX common sinking like the titanic.
Happy 4th everyone!
I’m stuck with you on my last couple hundred and have to hold. Good Lord I just checked I’m already in 35% tax bracket plus state. Thank God much was in tax free to begin with. Might have to parcel the rest over 2 years to keep the lowest tax burden.
The way I see it is holding for a lesser tax bill could easily compensate if the common goes down a bit more. Say 45 per share or what have you. 20% fed tax rate versus 32-37% is no joke. I would have to run the math but heck no am I giving them that large of a cut. Patience is in order for this situation. I am fortunate enough to not need the money right away.
I also need to investigate a hedge like another wise poster mentioned. The right option play to handle the situation. Or shorting the stock but I have no idea what that would cost. I need to figure it out or ask for advice.
I already looked at options for hedging and they are too expensive and thinly traded. But I am not an expert of such things.
I’m gonna see how quickly they get the conversion process straightened out and collect the next dividend before deciding what to do. If it gets up close to the conversion price then I will be real tempted to cash out.
Theoretically, the less uncertainty there is, and the more widely the issue is understood then the closer it will trade to conversion price. I think the key will be unrestricting the conversion shares and normalizing the process. It is certainly in their interest to do so since otherwise they will start getting lots of requests to convert one or two shares and it will all be a manual process for them.
Another option may be to convert smaller amounts over time to keep the tax bill under more control. Some risk there for sure. Good problem to have I guess. I had to sell because IRA but trying to advise PP Sr best I can.
The current cost to borrow (Ie short) MSEX is 0.3% on IBKR – pretty cheap..
Thx Maine,
He is Schwab, but we don’t really play the short game. Not going to rule it out, nor selling outright. He has even talked about maybe converting them and keeping the common shares (or some number of them) awhile to see what happens with the company. As some might remember, the Pig Pile’s generally view water companies as favorable places to be. All good problems to have at this point though.
MIDDLESEX WATER COMPANY INSIDER TRADING POLICY
Some useful information here.
https://investors.middlesexwater.com/static-files/4a32e7fb-11a8-4f71-9c60-cbbdc026ddce
capt,
That is for employees and people with direct relationship to middlesex like a director or officer. It won’t apply to a preferred shareholder.
It applies as it gives some insight to the Restricted shares which general relate to insiders or employees and discusses general council
as the shares convert to Restricted stock
I would stand to bet it was at least relevant at some point at a minimum. Because I would take a reasoned guess insiders and family probably were issued these to purchase as a private placement.
Corning Nat Gas had a private convertible issued 8 or so years ago, and insiders chewed up the vast majority of those shares. But I got some good crumbs though. But over time people retire and die and such and then they spill around or are converted which leads to a situation such as this.
Thanks for turning me on to that one Grid 👍
Charles that was good one wasnt it. Made tens of thousands on that and was very happy with it. But dang MSEXP has came from another planet…Hundreds and hundreds of thousands of dollars of gains, and likely more to come. This one even puts Nvidia to shame and that is hard to do!
Grid:
I think we all realize by now that MSEXP appears to be an anomaly, a fluke, an unbelievable outlier, and a once in a generation opportunity that just fell into the laps of III readers because of that large seller (and because you informed the readership). The stars were truly aligned perfectly.
But what I will never understand about MSEXP is how that large seller in June (or original owner/entity if the sale was indeed done by an Administrator for an Estate) could not know about the 12-to-1 convert feature?
The original owner most likely was a somewhat sophisticated retail investor that likely held the stock for years, especially since they had nearly $500K in the preferred and owned almost half of the outstanding shares? How could they not try and convert when the common MSEX was trading for $100+/share during that crazy mania for anything water related?
We are talking about nearly $5M in gains on 4500 shares of MSEXP if the preferred was converted and 12-to-1 common shares were received at that time (assuming the owner paid $100/share for MSEXP). That is serious money.
You can’t blame the Estate Administrator for not knowing about the conversion ratio, but III posters/sleuthers figured out the 12-to-1 ratio in only one business day (via a group effort). Based on the $450 bid price of MSEXP today, that original owner likely deprived his/her heirs of $1.6M in value due to their lack of homework.
I was a CFA in my pre-retired life and still have a belief that markets are somewhat efficient (although that belief is weakening).
The very good news is that the $1.6M in value is being transferred to the readers of III that bought and held onto the shares!
I equate this to almost like having a winning lottery ticket. Based on the average cost you provided previously you are sitting on nearly a $300K gain if you haven’t sold yet (and it could go $100K higher). Just an unbelievable gain on an illiquid preferred stock.
Congrats as you have provided this site with so much incredible information over the years and you very much deserve it!
And I recently finally bought some deep out of the money long term puts on NVDA. Even if NVDA collapses the gains won’t come close to what you’ve banked on MSEXP!
What I cannot figure out is how people here who were using a broker that listed the stock with the key word “convertible” in the description did not figure it out earlier. My broker and every website I ever visited NEVER gave me a single hint. And yes I have typed MSEXP into my broker’s system dozens of times over the years as well as SA, quantum, preferredstockchannel.com, etc… Yet I visited a small account my wife has with Schwab just a couple of days ago and there it is. “convertible”. What I never did was read MSEX’s website for information as I thought it was pretty much unbuyable after trying multiple times with GTC orders that expired fruitlessly.
Go figure!
Kid, I was poisoned from owning a few times before COVID. And Vanguard and OTC Markets never had the word “convertible” on it. Just 7% preferred. So I naturally assumed I snagged some of those sub 1000 share float 7% fixed issue. Only Ken bringing up the 4800 share trade did it get my brain working. As I know I am getting forgetful, but I damn near would bet my life I knew it was sub 1000 shares. Then Dick chimed in about seeing the word convertible and that got me to do a mental reset. It only made sense it had to be the 7% convertible….BTW, I can’t find it and can’t prove it…But I swear there used to be a “MSEXO” preferred back in the day. Maybe it was the now redeemed 8% convertible. I swear I remember that ticker now and never finding any.
MSEXO Middlesex Water Company $4.75 Preferred Stock
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=40210683
fc, maybe my brain aint as foggy as I thought, ha. Now do us a favor and find us some around say $50 to buy up! 👍…. There are 10,000 of those little bastards so I wonder why that ticker symbol disappeared.
Regarding the MSEXP, my call in to Schwab to day about conversion.
MSEXP Cuss# 59668027, Sec # 2615323
A registration fee applies, there is a 45-90 day conversion process
Shares are converted to Physical Restricted Shares AKA Certificates-
Security # 2615320 mailed to owner Should not be converted between Record date and Payment date.
To sell shares A letter of Opinion is required form Middlesex General Council at time of sale may need to be processed with Middlesex preferred Registration and transfer company.
Relationship and transfer manager Steve Jones P800-866-1340, Ex 2991
Addition Phone #’s given to me to people involved p. 732-638-7549
P.732-634-1500, P.732-218-1100..
I was advise to contact .Bernadette M. Sohler, Vice President of Corporate Affairs MIDDLESEX WATER COMPANY “A Provider of Water, Wastewater and Related Products and Services”
Phone: 732-638-7549
That all I found out, Schwab indicated tax implications as my shares or in IRA.
Oh wow. I can get an actual physical share certificate? This so old school. I cannot think of a single example of this now days. (Yes it sounds like a total pain in the rear but in a way pretty cool). I guess writing a letter or email is not quite dead yet to get things done!
Let me copy this data to a file on my PC. Thank you very much.
CaptRob, thanks a bunch for posting this.
Quick question regarding your last sentence. Should be no tax implications if shares held in an IRA correct?
Also, I’m wondering how all this would be done in an IRA as I can’t have my hands on certificates. But thanks again!!!!
Because the shares are basically getting wiped from your ira at the time of conversion, and are no longer held in your IRA and certificate mailed to you , there is a tax issues. as per Schwabs Rep .. The issue with the General Council is the question? is there a fee? The Rep read to me all they had at the moment about this. and said there have been several calls. all I know.. Happy 4th July everyone!!
-pig – I am thinking, if they really do send you physical paper then that equates to a ‘withdraw’ from the IRA so, yes, in that event, taxable.
I tried to contact Bernadette via e-mail late yesterday and directly by phone today. In neither case was there a response. She may be taking the rest of the week off given there is a holiday on Thursday. The phone line had no answering machine so I was unable to leave a message. It did helpfully chime in with an automated voice saying that no one was answering my call after about 15 rings.
It is odd that Schwab is saying this would be restricted stock since no one has found any mention of such a thing in the documents that have been posted. Whoever has the pdf files should do a search on keywords like “restricted” “certificate” etc… to see if anything turns up, and to make sure that any references are to publicly traded common stock.
Scott,
I already did that. The only true mention of restricted in the annual report is the employee stock plan. There are restrictions for them.
What we do not have is the actual document fully describing the terms of the preferred. That would help solve a lot of questions.
Scott,
I wonder if we should ask Middlesex to send out an announcement to all the brokers on how to handle this. It might be in their best interest as well.
On top of that they might choose to stream line the whole process so it is not such a pain in the azz for them. Wishful thinking perhaps.
I agree nothing much will happen this holiday week.
I already asked them for help in streamlining any conversion hangups in my email to them.
If it really has to convert into restricted shares then it will be very problematic to realize the full value of the shares. Maybe someone with more experience would like to chime in here, but I don’t think it is as simple as sending the certificate to your broker and then being able to trade it like every other share. I find it very unlikely that a publicly traded preferred would convert into restricted certificates. And most often restricted shares convert to regular unrestricted common shares at some point so there is a lot of info missing here.
Well the way I see it, personally, is that I do not want to pay short term cap gains. I am holding it in a taxable account. So I have a year plus a day to figure this out. So I will first capture the preferred dividend. I will then start the process to convert to start collecting the common dividend to double my income. So holding a paper cert is fine at that stage. I want my mailbox check, lol.
As time rolls on eventually this will settle down in the back half of this 1 year period and I can sell one day.
So it appears to me I have plenty of time to figure it out. I really do not want to pay fed/state tax of > 37%. 25% sounds much more reasonable to me.
So, it is indeed more complex that thought but, still doable. Taking possession of the certs, if bought in an IRA, would be a taxable event since you would take possession outside of the IRA (i.e., tantamount to a ‘withdraw’) – plus penalty if you’re not at least age 59.5 (- I think). The kicker here to me is, why does the general counsel have to review? Can they say “No”? If they do, what happens then? I was late to the game so, I only have 2 shares at $400 but sitting on a nice “return” anyway, as of now.
Well, I had 2 shares at 400 and they just sold for 480, a nice 20% return in a few hours – no where NEAR the absolute or percentage return as others here but, I was very late to the game…plus the complexity of the conversion seems a lot for a measly 2 shares, so I sold.
CNLPM at 6.33% yield
Kudos to all of the individuals who were able to purchase shares of MSEXP this week. Well done. However, you do have a Roaring Kitty situation on your hands now. I picked up a few shares in my Schwab account as well, they are the Convertible Preferred shares with a coupon rate of 7% (clearly stated on the order when I purchased). Basically about 10k shares outstanding, so the large holder has probably passed away and the estate had to sell the shares. Very similar to a small company I used to own when 30% of the shares traded on one day (NSYC , a small stockyard company and have the annual report when the majority holder passed away in 2017 and shares went to his family).
While a great trade, I would not expect to get 12 shares of the common stock in the near future. If possible, and with great knowledge, why did this person not convert the shares in the past? Probably because it is a “busted” preferred stock and there may be no conversion possible, like my LXP-C shares. I’m fine with holding my shares with a coupon rate of 6.5% on this one. Good company, but certainly a Roaring Kitty situation on the board right now. Best wishes to all shareholders.
Correction: the coupon rate is 7%. My yield on the security is about 6.5%.
I am obviously biased as I bought quite a bit.
Nobody wants to convert LXP-C because the common stock price is too low. There is no point to it. They cannot force a conversion because the stock price is also too low. So busted in the sense you take a huge loss to convert it but you can if you want. All of it’s value is based on its yield until LXP one day rises from the grave to get a stock price of approx 33-34 odd dollars per share.
As for MSEXP… quite a few brokers simply list it as a 7% cumulative preferred. Even a bloomberg terminal has some wrong info on it if you can believe that. I have never read such a confusing document about preferred until I read MSEX’s annual report.
It was not until the late 2000s that 12 shares of common would even pay more than the preferred by a decent amount. So if you wanted the income you would just stick with the preferred for a decade plus.
If I had 100 preferred of MSEXP just a few months ago and I saw a bid of 200 bucks per share.. I would have most likely sold it never knowing about the convertible aspect. How would I know unless my broker gave me a great hint? Only a couple do. Most do not. So can you imagine some person getting access to an account with 4K shares.. sees they can sell them for approx 100 dollars per share.. and BLAM. 400K dollars in their pocket. They are quite happy. Who would tell them to convert unless the broker had a HUGE hint.
Dunno.. I emailed MSEX. They pretty clearly stated it is convertible. It is the only preferred people can buy. All the rest are truly private and have no ticker symbol. I gave MSEX the ticker symbol. Their response is posted below.
Correction. LXP would have to be at 27 per share for the common for the preferred to have a value of 50ish dollars based on the conversion rate of 1.8643. Anything above 27 per share for the common would be gravy for the preferred. It’s value would switch from the yield to the common’s price as it goes higher. Thus “unbusted” at that stage.
But always convertible. Anytime you wish. No matter the common stock price.
Thanks FC. They have 21,000 outstanding preferred shares and we both bought the 7% convertible preferred (the other one has less than 1k based on filings). I’m fine holding this one at about 6.5% in my account for many years based on the credit quality.
But it won’t ever be converted into 12 common shares. There was a major holder that passed away (like in my mention of NSYC) and if conversion was possible then it would have been done 10 years ago. Investors buying now at $250 are getting a very nice dividend of 2.8% into perpetuity.
I guess I do not understand your line of logic except since it was possible in the past and now no longer is.
Yet you clearly state there are many 1000s of shares outstanding that have not been converted. The rules of conversion do not change over time just as your LXP-C will not change over time. A contract is a contract.
There are quite a few examples of preferred convertible still outstanding that nobody has converted yet still retain that conversion ability. People buy and sell them to this day except they tend to be valued at the conversion price since the knowledge is well known.
This very forum where people have superior knowledge of ill-liquid preferred were not even aware of MSEXP’s conversion ability until recently and you expect a normal person to figure it out? All these years someone was willing to pay a lot of money for MSEXP. Upwards of 175+ per share.
Why do you think that is?? I think I know why. They had superior knowledge but not the opportunity to buy a lot. They would have if they could.
fc, there is no logic because the basic facts were not understood or were not read. As of June 30, 2022, our restated certificate of incorporation, as amended, authorized the issuance of 120,357 shares of Preferred Stock of which 20,357 shares were outstanding as of June 30, 2022, in several series as described below… 784 shares of the 7% fixed….10,000 shares of the 4.75% fixed….9573 shares of the 7% Convertible. There are 3 preferreds not 2 as you already know, and the 4.75% fixed is half of their preferreds outstanding!
Comparing LXP-C to the MSEXP 7% convertible is like comparing an apple to an orange…
LXP-C = WFC-L and BAC-L, ala busted convertible trading off its yield only.
MSEXP = BMYMP (4% $50 par, 1 share can be owner converted into 16.96 shares of Bristol Meyers common anytime. (Thus why this $50 par preferred’s last trade was $900).
Grid,
In a way I am just reviewing things for my own benefit. By debating with Lou I hope to make a reasonable enough case where if I can switch his point of view it helps me be much more confident in my own. I should have been more confident in realizing this situation much earlier then I did. I would have acted much more quickly.
In the sense I could have lowered my risk by having a much lower cost basis in the worst case scenario if I am wrong. Now my cost on yield in a worst case is sub par. Not horrible but not optimal either.
From the 2019 annual report when they finally converted the remaining 8% cumulative convertible preferred.
“In 2019, all remaining outstanding no par $8.00 Series Cumulative and Convertible Preferred Stock (3,000 shares or approximately $0.3 million) were converted into 41,142 shares of common stock.”
As you can someone choose to convert their private shares in 2019.
Also if you read that same document which continues to be in the 2024 annual report:
“The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holders to exchange one convertible preferred share for twelve shares of the Company’s common stock. In addition, the Company may redeem up to 10% of the outstanding convertible stock in any calendar year at a price equal to the fair value of twelve shares of the Company’s common stock for each share of convertible stock redeemed.”
Also the email.
Subject: RE: About MSEXP preferred shares…
response:
“HI, Yes we have been getting several inquiries on this. The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holder to exchange one convertible preferred share for twelve shares of the Company’s common stock. This information can be found on page 63 of our latest Annual Report/10K found here https://investors.middlesexwater.com/static-files/afe54033-29ca-4554-8ff7-80593f8252a0
Hope that is helpful!
Bernadette M. Sohler, Vice President of Corporate Affairs MIDDLESEX WATER COMPANY “A Provider of Water, Wastewater and Related Products and Services”
Phone: 732-638-7549
bsohler@middlesexwater.com
”
What more proof do you need? Everyone has a right to their opinion but in this case your whole premise is why would someone sell something too cheap? Probably because it was quite difficult to figure it out. When a Grid does not even know it raises serious questions about the information being quite difficult to access. Even with a hint I had to read for hours to be sure. Yet some people who had the right broker got a solid hint right away. Just never the opportunity to buy. It was truly an ILL. Yet shares remained outstanding none the less.
Either way.. This is a gamble based on knowledge. Which happens from time to time in the stock market. It is not impossible. I am sure there are stories from the past similar to this.
From the 2015 annual report.
“The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holders to exchange one convertible preferred share for twelve shares of the Company’s common stock. In addition, the Company may redeem up to 10% of the outstanding convertible stock in any calendar year at a price equal to the fair value of twelve shares of the Company’s common stock for each share of convertible stock redeemed. In 2014, 4,293 shares (approximately $0.5 million) of the Company’s no par $7.00 Series Cumulative and Convertible Preferred Stock were converted into 51,516 shares of common stock. ”
All throughout their annual reports they are making assumptions for earnings when these preferred get fully converted. Now why would they do that exactly? Even in 2024.
So now we have evidence that just 9 years ago that people were converting it.
FC, thanks for taking the time to dig back to the 2015 annual report and providing the information above. I’m sure this took you some time to find and research.
At least at the current price level, I plan to sell off the shares I own in my retirement account for a nice profit, as I’m still not certain about the conversion process. Currently the bid appears to be at $392 according to Schwab. Odd how Fidelity lists it as a 7% Preferred and Schwab appears to call it a Convertible. It will be interesting to see if someone here can post that they tendered the convertible shares and 12 shares of the common were placed into his/her account for each share of the convertible
I am quite pleased with the credit quality of the utilities’ preferred stocks by Ameren, Eversource, and National Grid. Using quantumonline, you can find the Moody’s and SP ratings for these issues. Even though the originating companies are gone, the credit bureau ratings are all from 2023 or 2024.
I brought multiple issues from each of these companies. All were investment-grade rated by both Moody’s and SP (I call them double-rated IG). The going yield when I started seemed to be in the 6.2% – 6.3% range. I got a blended yield of 6.2%. A better quality & yield than I can get on the current issues with little to no call risk. However, if they are called, they range from 22% under PAR to 85% under PAR. You can find the current PAR value (it is above $50 or $100) on quantumonline also.
The combination of yield, quality, and percent under PAR is just not available with the current issues. My point is for a buy-and-hold investor, these issues are stronger than you can find in the overall preferred marketplace.
Kudos to Grid and the others who freely share their knowledge and experience of these issues.
My approach to utility preferred investing is to spread the risk over as many companies as possible. This way, if a Hawaii or California situation reoccurs, I am highly diversified. The impact to my overall portfolio will be marginal.
They are truly a no brainer to buy if you want a sense of security and sleep well at night. It was just a few years ago we would have dreamed of getting approx > 6% QDI from a BBB+ or better preferred. Now they are freely available at prices not seen in ages. I personally own a wide mix of them. So many I cannot even recall the ticker symbols easily. UEPEO, CNLPL, AILLM, NASRO, and on and on. I just buy them whenever I see the ask as decent even if it is just 25 shares here or there. It adds up. Then I never even bother worry about them unlike some other things I own. Before you know it you have 1000s and 1000s of dollars of qualified dividends rolling in to reinvest or spend as you wish.
Steve, I just love the articles on the Internet ( not) the dis-information and fear mongering to capture eyes. This morning a blurb on MSN saying PGE was cutting off power to people during some of the hottest days of the year. Then when I read it and it says 100 customers in one county and several more with hundreds affected due to high fire danger. We’re not talking 10’s of thousands, not even rolling brown outs. Just scaring people
You can find many of them. if not all of them, here.
https://innovativeincomeinvestor.com/50-and-100-preferred-shares/
Yes, i have seen this for years. I only invest (with rare exceptions) in Investment grade preffereds as rated by Moodys and/or S&P. I only recently realized that quatumonline has the last rating by these firms. I was surprised to see it was 2023 or 2024. For me, the critical data that I needed to pull the trigger.
I am going to start over at the top here about MSEXP.
This is the 1994 annual report for MSEX. See page 40 in the PDF.
https://investors.middlesexwater.com/static-files/563ab3a7-d4b3-4b86-8d8f-7db9be651e43
“In 1992, the Company issued 17,000 shares of no par $7.00 Cumulative and
Convertible preferred stock (convertible) for the acquisition of Tidewater. The conversion feature, which is effective five years from the date of issue, allows the security holders to exchange one convertible preferred share for six shares of the Company’s common stock.”
So now we can use the annual report from Dec 31, 2002. Page 34 inside the actual document. Notice the timing with a share split mentioned below.
https://investors.middlesexwater.com/node/10976/html
“The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holders to exchange one convertible preferred share for nine shares of the Company’s common stock. ”
Here are the stock split dates.
November 14, 2003 (4-for-3)
January 2, 2002 (3-for-2)
September 15, 1992 (2-for-1)
So if the preferred was originally 3 it was issued before Sept 15. If originally 6 after Sept 15th. The math works for both. I am having a really hard time finding original docs from 1992 era. Not repeated data but actually dated 1992.
As for if this is actually the convertible Schwab also listing the description as convertible was useful. It DOES NOT mention how many shares are outstanding at schlub. Also we know forum members now own more shares than there is outstanding for the uncallable 7% which appears to have never truly publicly traded like others they have issued over the years. Well at least I cannot find a single hint of any other preferred ticker symbol but there is hints that some used to like the 8% convertible.
So it raises the question.. why are we such chicken shits that we are not buying this up at 139.99 per preferred share that I see the ask is at?
I know my reasoning… this seems to good to be true and I do not want a yield under 6% if I am wrong.
1-800-323-4332 is the Schwab phone number for client reporting and security services. Option 2 will take you to the group that handles tender offers.
Does Schwab charge an extra OTC fee of $6.95 for each purchase of MSEXP ?
I tried putting in a buy order, but saw that they added the fee in the Preview page before confirmation to place order.
I own the shares at Ally. I called them. They are clueless without an announcement. Yet they understand the process. Great info Ken!
fc, good info.
On the phone with Fido rep: confirmed MSEXP is convertible. I questioned the share count of 784 and another team is working on getting an updated number, should hear back within a couple days.
Also, going back and forth via email with Middlesex IR. They request verification that I’m an owner of the preferred. When I asked why information on a publicly traded security was so hard to find, this was the response:
“It is very very sparsely held.”
Ken, I would make a strong bet it was a private placement originally. This is why records are hard to find. When something is issued privately they don’t have to have a complete type of IPO prospectus issued. So it can get buried in the sands of time so to speak.
Ken – Which email address did you use for Middlesex IR? I haven’t had any luck in getting a response yet. Thanks!
bsohler@middlesexwater.com
Bernadette M. Sohler, Vice President of Corporate Affairs
Fidelity verified (Bloomberg info) currently 784 outstanding shares, and originally 2500 shares issued.
He couldn’t explain how ~10,000 shares have traded over the past 3 weeks.
Now what to believe from Fidelity?? Counting on good info from Middlesex IR…
That is Fidelity’s problem. Bloomberg….They dont have the right source. Here is an example. When Vanguard allowed OTC trading it wouldnt allow AILLI to be traded, but let all its other sisters to be traded. They are the same preferreds from the same company…But Bloomberg told Vanguard AILLI was a private only company (and the other sisters were not) and Vanguard did not allow private preferreds to be bought. So I walked the rep through it. He understood Bloomberg was off their rocker. So he called upstairs and they say, that is the way it is even if it is wrong.
I also emailed Mrs. Sohler. No reply back. I mentioned I was probably another person with the same question.
As for bloomberg I have a feeling their data is just as confused as we are with this situation. This is not something they would bother be sure is 100% accurate as it would take a human speaking with MSEX to figure it out. You cannot just have a computer go through PDF files and figure it out. There is no cusip to really match it up with unless you have an “announcement” from 20 years ago.
And that is what I would like to get. An announcement on a previous 10% call or something like that with a cusip.
fc:
“So it raises the question.. why are we such chicken shits that we are not buying this up at 139.99 per preferred share that I see the ask is at?”
Word is getting out…someone just bought 200 shares at $160/share for a 4.375% yield.
This is one of the most unique situations I have ever seen on III. Grid is going to buy a Lambo when this is all said and done!
Kid, I want one of the esteemed sleuths here to figure it out while I am at a pool today. I likely won’t do anything for a while if it is indeed what we think it is. I bet this damn thing gets bought out in 10 years. That’s why it went over a 100 a few years ago as it almost did. Connecticut Water was the next smallest to MSEX and it finally succumbed. But we shall see in do time. Fun to dream anyhow.
What’s funny is Pig and I would have sopped up what we did even if it is just a fixed.
WOW,
I picked up 200 on Friday at $105, just for the dividend. This morning, I put a sell at $160, on a whim because it was such an odd beast. Lo and behold they were sold! I won’t complain even if you guys get a 12 to 1 conversion. Good luck.
”
HI, Yes we have been getting several inquiries on this. The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holder to exchange one convertible preferred share for twelve shares of the Company’s common stock. This information can be found on page 63 of our latest Annual Report/10K found here https://investors.middlesexwater.com/static-files/afe54033-29ca-4554-8ff7-80593f8252a0
Hope that is helpful!
Bernadette M. Sohler, Vice President of Corporate Affairs MIDDLESEX WATER COMPANY “A Provider of Water, Wastewater and Related Products and Services”
Phone: 732-638-7549
“
if anybody could see the smile on pig pile Sr’s face now.
Well.. I ended up with 501 shares. I bought that last 1 share for fun.
Next single share is 250. hehe
How do we know for sure that what we own is the convertible shares? Their balance sheet seems to indicate that there are two different $7 preferred shares.
Wait, Pig….Do you get the price increase, or does Papa get to keep it? Tell him it doesnt come out of your gifting money….Or he should make you “most favored son” status and get a bigger chunk of the pie, ha ha!
Grid, a breakfast at iHOP this morning will have to suffice for now, hahahaha
Fc, I guess you were the one who finally pulled the trigger back for the final kill-shot into the heart of this preferred today. Thank you sir and others for their help in solving this Sherlock Holmes mystery.
Yea. I was the one. My average cost per share is 127.50. I guess that 1.75 div coming up will take a bit of the sting off it. 😐
In the end.. i felt confident enough based on the research to say frick it. Bought it up. Worst case I would end up with a investment grade 5.5% cost on yield preferred. I have made worse trades then that.
Grid and fc:
Congrats to you both and the Pig Pile! Never thought I would ever see a situation where guys on this site could realize $50K – $100K gains in one weekend on an illiquid preferred.
You can get those lambos to match the color of your girlfriend’s or wife’s eyes for an extra $10K.
And don’t forget to take care of Tim!
I would like to say thank you to fc, Grid, Tim and everyone who helped sniff this out. This is a once in a lifetime type trade.
Got the same reply.
Now, having never owned a convertible, how does the process work?
Call your broker and for a lack of a better term open a ticket and tell them you want to convert. There are better terms for it but I forgot the correct one. They will look for announcements and there are none most likely. Tell them it is optional/voluntary. Tell them you get 12 common shares. Share the email you got or the one I posted. They need to figure it out. The days of us writing a letter to a proper address and doing it manually are long gone.
You will have better and easier luck at schlub and fido. I have to do this through Ally. Sigh.
Fc, Ally was good for some quirky issues to snag back in the day, but dang they were quirky. I had more than several times had either a $0.00 or even a negative balance showing (how is that even possible without margin) They would say dont worry the back offices have it correct. And they did eventually, but I got tired of it and transferred.
What is going through my head is not really converting them anymore it is more timing of it. MSEX has had a rough time with interest rates going up, an over priced common stock due to growth in earnings slowing down, and perhaps an unloved sector.
Is there really any rush to convert this? MSEX at approx 50 a share seems like their trend line if you max out a chart of them. I dunno. Feels like gambling not to convert right away and lock in the gains.
Also a part of me still feels this is not real. I don’t want to get my hopes up even though we have some very decent facts now. I told my wife about it and naturally she is happy but I explained the worst case is we own a quality preferred paying 5.5% on our cost basis. Anything else is still a risk until the common shares land into our account.
Fc, I did the same exact thing on CNIGP a year or two ago. It was a term dated convertible. Termed out in 2026 at $21 or so…But I knew they were getting bought out and it boiled down to NY PSC approving it. I knew they would because nobody gave a rats ass about CNIG (Corning Gas). Shares over the following year kept spilling out in $22-$27 range while waiting regulatory approval. And I kept buying and buying knowing they would be redeemed at around $29.10. Which they finally did…But it was a private placed issue that later had an OTC ticker assigned. Nobody knew or cared so I kept buying. Of course it wasnt the magnitude of this one potentially is though. And if regulators had denied it, I would have had my head handed to me. Im not doing anything immediately either. Im just glad the majority of mine are in a tax free account….Its a gamble I get it…But for every dollar over a longer term horizon the common would go up…..Whatever…it is what it is….And one takes there chances versus bird in hand, etc. etc.
I am done. 620 shares of MSEXP. cost basis is 150.xx. Had to let go quite a few SGOV shares to handle this screwy situation.
Fc, I confess I bought 60 more at gulp. $240. My other over 750 plus shares are about $105 since I jumped on a 100 at $111 this morning. The other 60 will drag it up a bit, ha. So Im at over 800 and done too. Unless price drops ha. You know if this was liquid and the market “knew about it” it should mirror more the trading of the Bristol Myers convertible or even VNORP which basically also trades around conversion value even though its an illiquid on OTC and actually has less shares outstanding than MSEXP. Its just more well known as it used to trade on NYSE before being delisted.
Yea. The only reason my cost basis is as low as it is.. that I was ready for premarket which no shares traded and I had my orders layered in already for 9:30 AM. I too bought at the start of the day but I will admit I bought quite a few expensive ones as well.
Even people buying at > 200 share have a pretty easy double/triple if this works out.
Frankly those old trades of people paying 200 bucks a share should have set of alarm bells for us. I always thought it was odd. Is BACRP convertible??? lol
E*TRADE shows a bid of $243 and as ask of $550.
Wow.
Bacrp…Ah found memories . Doubled my money in short order off 200 shares and about 70 bucks in one day if memory serves off 100. That game is over though.
fc, just plugged final numbers in my Yahoo spreadsheet. My overall cost basis is $114 and change thanks to that last small nutty purchase that took me over 800.
Yea. My hesitation ruined my cost basis on Friday. I figured just owning 100 shares was “neat” of such a rare issue.
You were probably the most comfortable with this issue with pig coming in second. I knew of it but for the last couple of years figured it was unbuyable in any quantity unless I wanted to over pay like FIISO. I just stopped paying attention to it.
Frankly it is no surprise, if this works out the way we think, that your knowledge and comfort with this situation will allow you to reap the largest rewards.
fc, Yes, I was very comfortable with it owning from the previous decade a few times….But for the wrong reasons obviously, ha. A little teamwork and brain storming got us across the rubicon to where we needed to get though!
If they go 4 consecutive quarters without paying the preferred dividend, you may be suddenly a member of the board. Or 2 of you. That would actually be quite epic.
Wow and congratulations!!!
– A Very Jealous Fellow Pref Investor 😉
The conversion can happen at any time? It doesn’t state timing there…still very interesting.
I was told by Schwab that the conversion is to restricted stock only, something about paper certificate- Schwab is not sure what restrictions it may come with, but only it would require their general counsel to approve a sale.
This is definitely more interesting than I thought it would be and many others too. If I am understanding what is being discussed here, there is a chance that each share of msexp we recently purchased can converted into 12 shares of msex? Assuming we can find someone at our brokers that can begin to understand our request convert?
New, if you haven’t determined through the lengthy discussion, yes it appears to be a 12 for 1 convertible, and company wrote fc to confirm that.
Yes, I see that now. I guess my question now is how do we know we bought the convertible shares? Just by ciphering out the volume that has changed hands recently?
New,
Is is really this simple. MSEXP is the convertible. I asked MSEX what MSEXP was. They replied back it is convertible. A broker replied to Dan, I think it was, it is convertible. 1 preferred == 12 common due to 3 stock splits over the years.
Also the uncallable has less than 1000 shares outstanding. The forum members here own > 2000 shares of MSEXP. It is impossible for it to be the 7% uncallable.
I know.. it really has not sunk in yet. I hope you bought some too! If yes congratulations!
I agree…But I don’t want to be all pleased and jinx it until the convertible end, ha. Really if the “market” catches wind of it ever, it should trade to a level close to conversion by itself. Granted I am not expecting it, but that is what other “in the money” convertibles have historically done.
I know what you mean by jinxing it. I don’t think anyone here will feel comfortable until one of us has actually converted it. If someone starts the process I hope they can report how it goes. I may very well be the first to go because in this situation I feel like locking in the profit, paying the taxes, and investing the returns might be the correct choice for me personally.
I have my shares in a taxable account and I do not think there is any clever way to minimize the tax bill except holding either the preferred or the common upon conversion for > 1 year and a day.
Converting does not create a taxable event, fyi.
fc,
in my very humble opinion, the way we will first know the conversion works as we expect it to, is when the price of this preferred skyrockets further towards the common x 12 value. because that will be the guy/gal who got them converted, using the proceeds to buy up the rest of the preferred’s available, if they are even available by that time.
What an unbelievable event, really incredible this has been unknown for this long. Which, is kind of the reason there is a part of me that even at this hr is skeptical about the whole thing. I read it, yep, thats what it says….but I never get this lucky. That is truly how I feel. but I will say this, a bigger part of me believes this than the part of me that believed it this weekend. Much thanks to you personally and those others giving there knowledge and communication on this and sharing so promptly.
Anyone here convert yet, or start the process? This is an interesting situation. Got a couple shares just for $hits and giggle earlier…I missed the big ramp.
I want the preferred dividend coming up so I am holding off for now. I am also curious if someone starts the process.
I am happy for you all and jealous as well that I missed it. It’s still exciting vicariously. Look at the bid/ask spread now. Hopefully Grid, fc, pig, etc. have already valued the shares. Could be an opportunity now or coming with bid at 396 and some orders at 360.
Yes, I started the conversion. It’s a little involved but not that bad.
“Converting does not create a taxable event”. Good to know, so the 1 year clock starts and stays with the purchase date of preferred then correct?
My plan will be simple then. Close to 600 of mine are in tax free accounts, so I will jettison them at the most convenient time down the road. My smaller several hundred plus taxable ones I am going to hold for a year plus. Im not letting Uncle Sam in on over 30% of my action via STCG.
It does not matter if you hold the preferred or the common. What matters is the purchase of the preferred and the final sale of the preferred or common is > 1 year plus a day.
So the answer to your questions is YES. I guess that is why many people like convertibles. Gives one a bit of flexibility. In the past I kind of shied away from them due to so many of them turn into losers conversion wise over time.
What I found interesting about MSEXP is that when they were issued 3 shares was probably valued at a total of 45 dollars or so compared to a 100 par preferred. Not really a great conversion rate. No wonder people did not convert for so long and forgot about it. Also MSEXP stopped the whole 10% call thing which stopped reminding people about it. Naturally the splits made it more interesting over time.
So you get a guaranteed 5 years of dividends. After that MSEXP could have kept calling 10% each year. I wonder if I did the math on that.. without converting.. would it have made sense to just keep on collecting the preferred div. Even after the first split. 6 shares might have only been approx 95-120 dollars back then. Who knows. I think I am too tired to go into that path of speculation. I am rambling.
fc, think of it this way. It has to be more enjoyable speculating about this instead of buying something at $100 and watching it go to $5 and speculating why it did that, ha.
Well whoever is buying right now aint no chicken shit.. that is for sure. Someone is collecting quite a few shares.
Converting it sure makes a lot more sense dividend wise and then holding the common for > 1 year and a day. MSEX has a pretty decent history of raising the dividend the last decade. It pretty much doubles your div income.
So you get a bigger div, you gamble on the stock going up or down, and you can hold for a year to lock in long term cap gains.
fc, actually even more than decent record. Over 50 years of annual common stock dividend increases. Certainly an elite aristocrat in that regard. And has paid a dividend quarterly since 1912. But unfortunately since it is a water ute the actual yield will be relatively low.
I don’t think they have increased the div that many years in a row. At least SA data shows the same quarterly dividend for a couple of years in a row back in the 1990s-2015 eras for the years you wish to examine. It has only been recently increasing it every year since 2015ish. Thus not an aristocrat of increasing for 25 years in a row or whatever the rules are.
But yes it has paid on the common quarterly for a very long time. I think the annual report said 100 years.
I see no reason why I cannot capture the preferre div coming up, convert, and then capture the common div right after if possible. At that stage your div income more than doubles to 15.6.
fc, your info is incorrect. Here is from the horses mouth, in 2021 and its increased yearly since then. It is a dividend aristocrat. Its always best to go for OSM, not other sources as they are frequently incorrect.
https://investors.middlesexwater.com/news-releases/news-release-details/middlesex-water-company-increases-common-dividend-64
SA data blows. Always does, I never look at it for correct data.
….We understand the importance of a dividend and are proud to continue to share our company’s success by announcing an increased annual dividend for the 49th consecutive year,” said Chairman, President and Chief Executive Officer Dennis W. Doll.
Welp.. you are correct and I am wrong. Stupid SA data.
Thanks for the doc. Now I can do the real math. I have not really gotten that far into reading those aspects yet from official sources. I need to get some work done for my day job. 😉
I also wonder who has the bid up of > 400 per share of the preferred right now. I show the last trade at 480 and that is still a decent profit.
“It pretty much doubles your div income.”
Thanks fc, hadn’t yet considered this angle while weighing the pros and cons of converting.
Would turn an 6.89% yield from MSEXP to a 15.35% yield from MSEX on my cost basis.
MSEX is a Dividend King (50+ consecutive years of dividend increases) at 51 years.
This is why I am so curious about this situation.
If I wasn’t involved, it would be 100% certain to be the convertible, but since I own some, the jinx may be in play. Sorry to ruin it for y’all.
Fc, between you, myself, and Pig we are collectively over 2k ourselves.
I screwed the pooch on this one. A true 🎁..
I may get FOMO and buy it tmmrw for $300, then find out later something isn’t as expected. Lol
Totally understand your viewpoint Maine, 100%.
I bought 600 on Friday and still have them.
Now we are pushing closer to 3k from four people. 4800 got dumped a couple weeks ago and were sold again. Appears around 6500 were traded past 2 sessions, so some more regifting apparently has been occurring.
CNLPL at 51.9 gives a 6.24% yield. Trading above par, DYOR