The “Hated” Spark Energy Tenders for Preferred Issue

The hated energy retailer Spark Energy (SPKE) has made a tender offer for their 8.75% Fixed-to-Floating rate preferred (SPKEP).

The tender is at $18/share for up to 1 million shares out of a total outstanding of 3.6 million shares.

Given that the shares are now trading at $19/share I would be surprised to see many takers of the tender, but obviously the tender is meant to convey confidence by management in the company.

The company press release is here.

I would not be surprised to see more tenders like this–in particular by those companies who believe there is inflation in the future with accompanying higher interest rates.

Thanks to Fabrib for posting this information in the Reader Initiated Alerts Section.

14 thoughts on “The “Hated” Spark Energy Tenders for Preferred Issue”

  1. It looks like the tender offer of up to 1,000,000 shares Spark Energy’s 8.75% Series A Cumulative Preferred fell far short of the objective, with only 37,527 shares tendered according to the Company’s press release today.

    With the poor performance, the company faces the quarterly dividend which, based on today’s closing price, will produce an annualized yield of just shy of 10% until the April 2022 repricing date.

    According to the NASDAQ website, the float appears to be held by retail investors, with no reported institutional holdings. This contrasts with two-thirds institutional ownership of the common stock, which closed at $7.29 today, down $0.25 (3.32%).

  2. Spark upped the tender price to $22 per share and extended the tender period to June 16. The problem is that SPKEP closed today, June 4, at $22.25 (bid) and traded as high as $23.00 on a 500+ share trade.

    Even though the tender offer was increased to $22 per share, it does not compensate for the upcoming $0.55 per share dividend, on the June 30 ex-date.

    Given the current price and the quarterly cumulative dividend, which does not reprise until April of 2022, the yield is close to 10%. In April of 2022, the call provision at $25 per share kicks-in.

    If not called, the dividend repricess to 3-month LIBOR + 5.675% with quarterly adjustments thereafter.

    Based on trading prices that were “in the money, they may be able to pull off the tender; however, there do not appear to be any institutional holders either.

  3. “Gary–as Grid said–fake utility (reseller)”

    Does anyone remember the name “Enron”? Does anyone remember what their business was when they finally died? (They had once been a legitimate pipeline company.)

    I remember a conversation I once had with The Female when all of the ‘experts’ were saying to buy Enron….

    1. Gary, I started with me blasting these “fake utility” issuances when they came to market or when discussed and to stay away from them…This one and Just (say no) Energy were two that came to mind. Some playful bantering with Tim a good while back.

      1. Grid /others-
        So a utility issues fake preferreds? Reselling what? What is fake about them? Confused more.

        1. Gary–some states have deregulated utility service and so essentially you can run a business that is simply a retail reseller business. They buy electricity from the producers ‘in bulk’ and resell at the retail rate. They produce no power or energy of any sort. They are not really ‘fake’, but they are not a producer of any sort–this is kind of running joke between some of us (the fake utility part).

        2. Gary, Tim pretty much covered it. More a joke that didnt die. I am “Mr. Ute Preferred” and I was just opining its a “fake utility” and uninvestible to me. See when you look at its sector category such as TD Ameritrade it is listed as “electric utility”. Bogus…There is no regulated monopoly anything for these types of issues. Doesnt mean its uninvestible for others, Im just not eating a veggie burger and calling it meat, ha.

          1. Ok- got it. When I owned ute commons I did try to avoid that type- just didn’t make the connection to preferreds.
            thanks to all

    2. Gary–as Grid said–fake utility (reseller) and I owned some for 6 months–it took 5 months to get back my investment after they took a tumble–but I did end up in the green–just ook a while.

      1. Sparke Electric certainly has never been a good preferred. Then it has up and down quarter to quarter, better than the near bankrupt Just Energy (preferred and common both suspended, which I immediately sold all and “ask question later” when a new CEO surfaced and changed their story, selling their prior claimed better profit margin development in UK”. I sold all my 400 shares with the highest costs and kept just 300 shares. Good to take some tax loss. Strange that there are buyers because this is NOT the first time SPARKE Energy has offered new shares, except that this time, they really need to sell way below par. Thanks to Tim and Gridbird, I have replaced with MORE AATRL @ $39.5 (I have learned NOT to be GREEDY but 6.51% mid Quarter SWAN is Definitely a good asset to own) and 300 shares of Gridbird’s non SWAN but decent FPI-B @ $22.16. Obviously paid too much but then I need to get my blood drawn for routine testing and did not get to see drastic market downturn. Just put in $2000 on two of the better performing mutual funds. Both took a great 2% dive. Thanks to Guy Adami of FAST MONEY, who lost the “opportunity” of buying Apple, Googl, Amazon, and Microsoft, buying at this junction seems dicey. Glad that I sold my EWBC (mid specialty Chinese bank with great quarterly report). When the likes of JPM, BAC, C are both declining, I continue to stay in fixed income. Then I was stupid to listen to Askola plus one or more SA eREIT to buy BRX (presumably less leverage Mall), market action of BRX better than KIM (KIMCO), it got SMASHED once again. Thanks to Brookfield, their eREIT got smashed but I believe that dividends are reasonably safe and their preferreds seem to climb back. Fantastic Brookfield renewable, BEP common and BEP-A, TERP and AY (non Brookfield). I also keep their fossil pipeline, the resurrected the old TOO-E, B now renamed as ALIN-E. B and A.
        CBB-B (Cincinnati Bell) now taken by Margeurite MLP (scary name from the days of Rida Morwa) outbidding Brookfield seems to do fine. I was thinking that it could become another ET (Energy Transfer). Worst stock in the world second only to Navio Maritime preferreds should be GLNG and GLMP, dividend slashed, Grandmother and Mother both (I was hoping to sell the Mother GLMP taking HUGE tax loss) but the granddaughter, GLMPP climbed back to $17.8 actually higher than GLOG, GLOP (Grandmother, mother) ‘s granddaughters, the A, B and C. GLMP has to be my worst investment. My cost was a whopping near $39,000 now worth $6,000 or LESS without counting the dividends received. Jeff Gundlach, the new Bond King, well thought off by Baron’s Mag. I continued to resist the temptation of deals to subscribe the magazine. Golar is a large cap shipper, they seem to issue tons of GLNG, GLMP and at times GLMPP. Only the new shares of GLMPP was released via 8K. Nothing was ever mentioned for the GLNG and GLMPP. My last addition was Jan 20, 2020, a little over $1,000. Funny thing on SPKEP, it closed at $19.785 vs my low ball at $19.22. No regrets. It is NOT a JE-A (Just Energy) now but then it could become one. Who knows. I still remember the comments when SPKEP come out. Their customers hate their deals, overcharging.

      2. SPKEP actually closed at $19.785 vs my low ball around $19.24 or so. No regrets. It probably can go one more round. It gets dicey every time. Last time, it reissued at par. Thanks go Rida Morwa’s big loudspeaker, UTG (Reeves Utility Closed End fund) climbing back nicely as compared to Vanguard utility the equivalent to XLU. His sheeps FOLLOW Rida literally “religiously”. I quietly sold all my CLNY preferreds. This one could be Enron, former CEO and founder claimed that he is a personal friend of the president. I rather stay with STWD, dicey (sold most of my shares in non IRA). CEO was interviewed by CNBC as an “expert” to guide us out the COVID 19. Ever since that, STWD seems to stay flat. Magic.

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