Some OTC Preferred Issues Falling Hard

Just skimming through issues that are trading on the OTC market and do not have up to date information filed with the SEC some are falling hard on large volume.

In particular I noted AmTrust Financial which has 6 issues in the ‘no info’ category, has all 6 issues down 5-27% on 200% to 2500% normal volume.

Today is the last tradable day for many of these issues as SEC amended rule 15c2-11 goes into effect tomorrow. Issues can not be quoted if they don’t have data filed with the SEC and market makers would need to ‘sponsor’ issues to get them tradable again.

If you are not familiar with this rule you can read this article here. You can also follow along on the page I had set up for this topic here.

52 thoughts on “Some OTC Preferred Issues Falling Hard”

  1. A tale of two preferreds: Interesting contrast between the Landenburg Thalman issues and the Amtrust issues. The LTS Issues (LTSA, LTSF, LTSH,LTSK,LTSL) had a death by a thousand cuts type fall over ~ the last two months. The Amtrust issues (AFSIA, AFSIB, AFSIC, AFSIM, AFSIN, AFSIP, AFFS, AFFT) were relatively flat until today they all got clobbered. They closed down anywhere from 4.6% to 14.0%. The low of the day for AFSIA was 15.30 down 27.1% from Friday’s close. It is the textbook definition of illiquidity. The volume was not all that high in absolute terms, 11k up to 33k. Buyers had smartly set low buy prices and got filled.

    Two different approaches to sellers that did NOT want to go through the unknowns of the “Pink No Information” fiasco. No other trades really stood out today IMO.

    We do NOT own or have open orders for any of the AMTRUST issues in any account. We do own small quantities of the LTS# issues and have no open orders.

    1. Sadly I must admit to having been unaware of these changes until yesterday when I read about them on this site. As regards Amtrust, would you expect them to continue to pay the dividends on their preferreds? Thanks.

  2. Is it OK to swear on this board?
    https://www.otcmarkets.com/stock/GMLPF/overview
    GMLPF has moved to the expert market with no warning. I spoke for 15 minutes on August 23rd with Josh Kane (head of NFE IR) and Chris Guinta (NFE CFO) to warn them of this possibility, and dammit, they let it slide.
    I am reassured somewhat by their assertions during this call that they are all in favor of full financial disclosure (and by the fact that they posted GMLP financials on the NFE IR web site), but dammit, it didn’t have to happen this way.

    1. ESW3:

      Unbelievable. Was buying GMLPF yesterday obviously thinking it would stay current. So we have no hope of buying or selling it now on the “Expert Market”? Can’t even get quotes on that “exchange”.

      Glad I kept the position small…..have to hope NFE is a survivor and they call it one day.

      1. ESW3:

        None of these illiquid preferreds are safe from the new “rule” now. Looks like AATRL also got hit with GMLPF.

        I just blew out of my TECTP at $10.25; who knows if this security will be safe going forward? Tectonic isn’t even a public company.

        This truly sucks.

      2. I saw a GMLPF trade go by at ~20.02, off 11.5% or so. I assume that was on the expert market. I spoke to a broker today, they are allowing selling but not buying., a good deal for the sharks. So far they are accepting orders on line as usual, with no need to call the trading desk. He mentioned that it might change. I put a test order up, no action, but I entered it as usual.

        Certainly its your call, and DYODD, but I am not particularly uncomfortable holding GMLPF. There’s a lot of selling on some of these issues. I am in no rush to offer GMLPF up as a ritual sacrifice to the hungry alligators lurking in the quiet lagoon.

        That was a bad metaphor, but, under the new SEC “investor protection” rule, I do feel like one of those cute Florida puppies that goes out for a quiet morning walk then disappears with a splash under dark and brackish waters.

        Just my opinion.

  3. I think Fido woke up at some point during the day, or I was just unlucky because they cancelled both of the orders I placed. I had already bought these around $1016 last year, but wanted to round out what I had and placed another couple of orders today. One for around that amount and a lowball. Both were cancelled this afternoon.

    My Moody’s account was suspended today too for some reason. I only use it to look things up and I don’t think they have any comment boards, which I would never have used it for anyway, so I am not sure what that was about. I just made a new account instead of fussing with contacting them. Must be my turn in the barrel today.

  4. SLMNP has been Pink No Info since 2017, since the issuer of SLMNP has not filed financials since then. GMLP is also Pink No Info since the NFE acquisition since there are no longer financials for the MLP. OTC Markets and/or brokers may have been slow to put these on the right list, but the reality is these are Pink No Info. I sold all my Pink No Info holdings months ago, except for GMLP which is very expensive for NFE and part of the whole acquisition thesis was that NFE could refinance at lower rates, so even though this will not be quoted, I’m banking on a redemption next year. If not, have a high coupon until Wes Edens figures out how to screw you over there, which is certainly possible.

  5. SLMNP (originally A. Schulman) is now owned by LYB, which trades on the NYSE and reports quarterly results. This looks to be an error and will have to be corrected. The OTC seems to be looking for quarterly results from A. Schulman, which don’t exist anymore and hence they are labeling it as ‘Pink No Information’. Once they see that the company was taken over by LYB, the Pink No Information classification will go away. Great buying opportunity here…

      1. Cant fight city hall on this one, and my take mirrors yours, mcg. Also I guess they need to be segregated to comply because LYB IR Big Chief told me this issue is not an obligation of LYB.

        1. The chief obviously needs to read his quarterly 10k. It clearly states that these are obligations of LYB….

          Redeemable Non-controlling Interests
          Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by our
          consolidated subsidiary. As of June 30, 2021 and December 31, 2020, we had 115,374 shares of redeemable non-controlling interest stock outstanding. In
          February and May 2021, we paid cash dividends of $15.00 per share to our redeemable non-controlling interest shareholders of record as of January 15,
          2021 and April 15, 2021. These dividends totaled $3 million for each of the six months ended June 30, 2021 and 2020.

          1. Chief: “Assistant Chief!”

            AChief: Yes, Chief

            Chief: “Read this 10-k for me and report back!” “And make it snappy”

            AChief: Right away Chief….

          2. I dont think you are reading it correctly. As it does say issued by consolidated subsidiary. There is a legal reason for this and seperation of the hold co and sub.
            Here is his note.

            Thank you for your ownership of the convertible shares. These shares are not guaranteed by LyondellBasell. But the issuer is a wholly-owned subsidiary of LyondellBasell.

            Best regards –

            David Kinney
            Head of Investor Relations

            LyondellBasell
            LyondellBasell Tower, Suite 300
            1221 McKinney Street
            PO Box 3646 (77253-3646)
            Houston, TX 77010 USA

            1. Could both points be right? The payments aren’t *obligations* of LB, but the shares must be theoretically *redeemable* at some point for the 10Q statement to be accurate.

              1. You’ll have to check what the definition of redeemable means per the prospectus. There is a put option which would cause the co to pay out that amount but again that is the responsibility of the subsidiary not LYB directly.

                1. mcg

                  Here’s from the prospectus – page 7

                  “We may redeem our preferred stock, in whole or in part, at any time or from time to time as determined by our Board of Directors, at a price equal to $100.00 per share, plus any accrued and unpaid dividends. Subject to the provisions of our Certificate of Incorporation, our Board of Directors will have full power and authority to prescribe the terms and conditions of the redemption of any shares of our preferred stock. We also may purchase shares of our preferred stock for the purpose or in anticipation of redemption at a price not to exceed the redemption price. ”

                  https://www.sec.gov/Archives/edgar/data/87565/000119312515156976/d914854d424b5.htm

                  1. NW, that was prior to the buy out. That is no longer applicable. Owners had a short window chance to redeem at consummation of acquisition. Only about 9,000 shares out of about 125,000 were tendered. You have to go deeper into prospectus for the applicable result.
                    The “fundamental change” occurred and that made it no longer applicable.
                    We went through all this in long discussions here a couple years ago. When I first bought several years ago, I assumed it to be LYB obligation and the “redeemable put” at $1000. But other people got involved and did a great job of digging and communicating with LYB to determine the owner “put option” and obligator of payment is.

              2. This is has been confirmed several times in years past by inquires to LYB. The issue is redeemable only by shareholder to company per the terms established from the conversion option of A Schulman being acquired. Its somewhere around $850 when adding the conversion factor and price per share acquired plus a CVR amount that came from a winning lawsuit outcome from A Schulman.

      2. Not the intent of the new rule. A. Schulman does not exist. It has been completely absorbed and financials from that business cannot be broken out…Schulman is the chemical supply portion of the polymer creation process…the entire process is all now owned by LYB . The point of the rule was to get some financial information to investors so they become knowledgeable about what they are purchasing. LYB assumed all of A. Schulman’s liabilities in the takeover. The ultimate risk of SLMNP is determined by LYB’s financials.

        OTC will be sued if they keep it the way it is.

    1. TD Ameritrade shows SLMNP when I pull it up on their website as OTC Pink —
      Current Information. Wish I had been home to buy more.

      1. David, Im not suggesting to buy or sell. Just make sure you are aware of this, as this was just added today evidently to SLMNP on OTC Markets. So if it sticks there it will most likely eventually drift to TD.
        Warning! This company may not be making material information publicly available
        Buying or selling a security on the basis of material nonpublic material information is prohibited under Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b5-1 thereunder. Violators may be subject to civil and criminal penalties.
        Warning! Unsolicited Quotes Only
        Investors should be aware that no firm is making a market in this stock on OTC Link. All prices reflect unsolicited customer orders and investors may have a difficult time selling this stock. Click here for more info on Unsolicited Quotes.
        https://www.otcmarkets.com/stock/SLMNP/quote

      2. David,
        Earlier today TDA had SLMNP as pink – no info. I sold most of what I had. After your post, I checked and, indeed, it now says pink – current info. I tried to enter low ball bids while it was “no info” and “current info” and both times they were rejected. If the price doesn’t fall through the floor in the morning, I will probably unload the last few. If it becomes tradable again, I will probably re-enter if the price is to my liking.

        What baffles me is that someone is obviously buying, but they are apparently not TDA clients….. AATRL, OCESP also traded today as I am sure others as well. Thanks again to the SEC for “protecting” me by making me sell solid income producing securities. I would love to know who will be the beneficiary (the buyers) of all this selling once the dust settles….

        1. There are a lot of income funds that would kill for the yields they are able to get these for now and don’t care about liquidity, as they are chock full of 144A stuff already.

        2. I’m late to this discussion, but I did buy some SLMNP I had on a GTC order today at 1020 through Fidelity. My personal view in regards to the lYB discussion is that technically they can say it’s a subsidiary and thereby not an LYB liability, but the risk of them not honoring SLMNP is less, as to do so would raise their cost of capital elsewhere. Hence the reward of screwing SLMNP holders is a fraction of the cost they would get hit with in terms of their capital. Just my 2c though.

          1. Yes, NCSI, I agree with you. Maybe this wasnt written clear, but the concern for me isnt getting paid or risk of divi. Its the repercussion of it being a non reportable issue and thus caught under the new SEC rule and being possibly “trapped” in the issue if buyers dry up.
            If one is unconcerned about that happening, then it doesnt matter.

    1. James, my orders for SLMNP were cancelled by Fido — so you can place them, but they won’t be allowed to fill apparently.

      1. breaking it down by US preferreds. Some baby bonds (like 2 from Amtrust) are classified as “other”, so not in this list)
        you get this list.
        AATRL AMG CAP TR II 5.15% CONV PS
        AFSIA AMTRUST FINCL SVCS PFD A PS
        AFSIB AMTRUST FINCL D/S PFD B PS
        AFSIC AMTRUST FINCL D/S PFD C PS
        AFSIM AMTRUST FINCL D/S PFD E PS
        AFSIN AMTRUST FINCL D/S PFD F PS
        AFSIP AMTRUST FINCL D/S PFD D PS
        AGRIP AGRIBANK FCB FXD/FLT A PR PS
        ASCS AMER CRYSTAL SUGAR PFD PS
        BANGN VERSANT PWR PFD PS
        BDWGP BROADWING COMMUN 12.5PFDB PS
        CBTRP CORP-BCKD (JC PENNY)07-1 PS
        CTGSP CONN NATURAL GAS 8 PFD PS
        CTPPO CENTRAL MAINE PWR 6 PR PS
        DMRRP DAYTON & MICH RR 8 PR GTD PS
        EPORP EPIC CORP 5% A PFD PS
        FSMEM FRESENIUS MED CRE HLD 6PR PS
        FSMEN FRESENIUS MED CRE HL B PR PS
        FSMEO FRESENIUS MED CRE HL A PR PS
        HGUBP HIGHLANDS CAP TR PR C/SHS PS
        HSCM HIGHLAND SURPRISE CON MNG PS
        LTSA LADENBURG THALMANN PFD A PS
        MSLXP MIDSOUTH BANCORP INC PF C PS
        MSSEL MASSACHUSETTS ELEC 4.44PR PS
        NICRL NICOR INC 5 CV PR PS
        NWCOP NEWS CORP FINCL TR 5.00PR PS
        OCESO OCEAN SPRAY 2ND PART 4 PR PS
        OCESP OCEAN SPRAY 4 PR PS
        PARDP PONIARD PHARM 2.4375 PFD PS
        SKTPP SKYTOP LODGE CORP 7 PFD PS
        SLMNP LYONDELLBASELL ADVCD PFD PS
        SSRAP SATURNS SRS ROBCK 7.25 A PS
        TSFGN SOUTH FINCL GRP PFD D-V PS
        WGNAP WGNB CORP 9% A PFD PS
        YGYIP YOUNGEVITY INTL 9.75 PFD PS

        1. Speaking of AATRL, has anyone reached out to their IR department to see why they left this issue hanging?
          There seems to be a few others on the list that are in the same boat.
          News Corp, Nicor Fresenius jump right out at me and everybody knows the story about Agribank.

    2. I couldn’t buy on ETrade, but had no problem on Fido. Order got filled @ 1015. My friend did better, got his filled at 1012.

  6. Looks like some OTC issues were just re-classified as Pink-no info from Pink-limited info. The Amtrust issues and SLMNP were not Pink-no info as recently as I think Friday. Looks like it changed today….one day before the rules go into effect.

  7. What is happening with SLMNP? It has dropped below my purchase price? This was an illiquid but attractive preferred? LYB seems to be doing Okay.

  8. So I am hearing on this SEC rule 15c2-11 that the effective date has been postponed minimum of 3 months to January 3, 2022 due to “operational and systems changes necessary to comply with the amendments to rule SEC15c2-11 for fixed income securities” Sorry do not have link but will try to obtain…

      1. Keep in mind Dave, this may have no impact on fixed income securities trading as equities. Ala, the baby bonds…. FINRA doesnt even acknowledge them as such listing them as “equity linked securities”.
        We shall see…

        1. Well Grid, I got a shock today. Opened my account on TDA and it said I was almost 12,000 in the red. But everything was showing green. Then I looked and they finally got around to putting my shares of WTREP to zero
          Made me feel a lot poorer

          1. Hey Charles here is the good news (it hit my TD also, another brokerage already zapped me), its less painful to lose it all at once. Then for it to drip drip. Its at zero now, it cant go any lower! 🙂

  9. AmTrust come compagnia assicurativa non è tenuta a fornire informazioni finanziarie e aziendali aggiornate alle autorità di regolamentazione e alla SEC?

    1. Google translate:

      Amtrust as insurance company is not required to provide financial and business information updated to regulatory authorities and the SEC?

      1. So why are their preferreds dropping like rocks? Are people confused? Fidelity are still trading them.

        1. Because the brokers are likely to ban buying and probably quoting anyway. Have you tried to convince a broker that some baby bond or preferred trading on the stock exchange or OTC is not actually a “stock”? Good luck. Plus they’ll still be listed as No Quotes, I mean No Info, on OTCM which will do doubt be the end of the discussion, 3 month SEC reprieve or not.

          If you don’t want to own it forever, today could be the last day to get out. You’ve been warned.

          1. If i sell now i lose $5000. I assume they will continue to pay the divs. Anyway AFSI was not supposed to be affected. I screwed up big time on these:(

  10. Thanks, Tim. This list of OTC Issues seems to include GMLPF, which is not part of the restricted issues and is “Pink Current Information” with reporting status as “SEC Reporting”.

    Traded down to $22.05 (down 5%), but not on huge volume. Lowest price for the security since it was renamed with new ticker.

    Some investors appear to just be indiscriminately selling any preferred listed on the OTC.

    Buying a little more today.

    1. Rob, I checked the list of restricted securities that I received from TD on 8/18/21 and indeed GMLPF is not on that list. Price is recovering a bit as of this writing.

      1. GMLPF is under a subsidiary of NFE and May run afoul as the same situation as SLMNP. Some folks don’t want to deal with the uncertainty or hassle …. Like me

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