Farmland Partners (FPI) has been a disaster for common shareholders since IPO.
On top of the capital losses, shareholders have seen their dividend slashed 60%. In the conference calls, management has repeatedly emphasized NAV, most recently claiming that NAV is $11.50-$12.50 per share.
With shares now trading below $6, that would mean FPI is trading around a 50% discount from NAV using management's estimate. Some investors might believe that a private-equity firm or group will come in and buy the company.
When considering how likely a buyout offer is, we need to consider the capital structure of FPI. The common shares make up a very small portion of what a potential acquirer would have to purchase.
Capital structure of FPI:
Common - 18%
Series A - 12%
Liabilities - 54%
Preferred - 16%
As of September 30, 2018, common shares only made up 18% of the total enterprise value. Any potential acquirer would have to assume or pay off the outstanding debt, as well as the Series A and Series B Preferred shares.
The Series B (FPI.PB) shares are currently trading at a significant discount on the market, but any acquirer would likely have to redeem the majority of them at liquidation value.
Source:
Farmland Partners: Buyout Potential - Farmland Partners Inc (NYSE:FPI) | Seeking Alpha
