Just a quick review on the recent new issues now trading.
The new Allstate Corporation non cumulative 5.625% preferred began trading on the OTC Grey Market yesterday and is right around $25/share. We would expect (as would some of our readers) that the shares will have a shot at $25.50 once they get to the big board–maybe a 50 cent flip is in order for those so inclined. When this 20 million share offering was announced the other 5 preferreds outstanding from Allstate took a bit of a tumble.
Insurer WR Berkley issued 5.70% subordinated debentures (NYSE:WRB-E) recently and they have not yet begun trading. There are 3 other WRB debentures outstanding and the 5.625% issue is trading at $25.12–down from $25.50 when the new issue was announced. We expect the new issue to trade up toward $25.25 when trading begins.
The Tristate Capital Holding 6.75% non cumulative fixed to floating preferred offering has been trading strongly up near $26 and closing today at $25.88. The issue begins trading tomorrow on the NYSE.
The investment grade Apollo Global Management 6.375% issue (NYSE:APO-B) has traded weakly and is now at $24.82
The 7.125% QTS Realty cumulative preferred (NYSE:QTS-A) has traded around $25 closing today at $25.28. QTS is a data center REIT.
The Compass Diversified LLC 7.875% fixed to floating preferred (NYSE:CODI-B) continues to trade very poorly at $23.70 3 weeks after issuance.
Lastly utility CMS Energy 5.625% subordinated debentures (NYSE:CMSA) have traded right around the issuance price of $25.
So what does this tell us? The most obvious is that any issues with a K-1 attached to ownership (Apollo and Compass) are truly unloved.
And as we have noticed before any banking issue with a coupon up in the high 6’s have traded strongly in the last year. These are typically junk rated issues. Those such as the low coupon Webster Financial (NYSE:WBS-F) which is slightly higher quality than the Tristate Capital Holding mentioned above, but has a meager 5.25% coupon has traded poorly at $24.15 3 1/2 months after issuance.
It would appear whether an issue has cumulative dividends or is non cumulative and whether dividends are qualified or not has little impact on the trading strength of a new issue.
This short bit of history may help investors to choose which issues to buy on the OTC Grey Market in the coming months. There is nothing more disheatening than buying a new issue at $25 and watching it fall to $24 within a month (we have experience in this as have most investors that have been active in the new issue market).