Impac Mortgage Holdings Inc (IMPM)

[Joe Stocks]

>>The $25 liquidation preference is book value. These shares own the stated equity book value. A conversion from preferred to common would be accretive to the common stock equity book value. <<

Dvae, I don't follow you on this. Liquidation preference is not book value. Liquidation preference only denotes priority for distribution in the case of liquidation. Voluntary or involuntary liquidation would see distributions going to creditors before anything would fall to equity. The liquidation preference which is common for traditional preferred shares would see these shares getting full distribution up to the $25 per share face value. But, you know as well as I that if we get to that point where there is a a liquidation, more than likely all shareholder equity would be gone as I see no other reason for IMH to liquidate except for a bankruptcy filing. I do not think it is accurate to say these preferreds own the book value.

Also, if IMH agreed to convert these preferreds to common equity, it could be nothing but dilutive. Obviously it would increase the number of common shares outstanding, but earnings would not see a bump to offset, so earnings would be dilutive. Can you explain why you say they would be accretive?

I have stated before, I think the real value is in the IMPHP shares and not the IMPHO shares. Over the required number of shares were tendered by the IMPHO shareholders to approve the changes to the preferreds contract terms.

However, the holders of the IMPHO did not. Only after combining the two did the company say that they had enough shares tendered to force the new terms on those that did not tender their shares. If I was the court I would find it hard to say that the IMPHO holders tendered enough shares that the terms would be changed for the IMPHO shares. IMO, I would say the IMPHO holders are due cumulative dividends and the original terms of the prospectus. I can not say that for the IMPHP shares as the holders did summit the required majority tendered shares to change the terms. I am very surprised that the court has not ruled in favor of the IMPHO holders. I wonder why this case is not moving forward, or at least appears stalled. I did look at the most recent 10K and they still note that the case is active as of early last year. From the 12/31/2013 10K;

We are also subject to a purported class action lawsuit relating to the tender of our preferred stock that is seeking cumulative dividends and the election of two directors by the preferred holders. We will incur defense costs and other expenses in connection with the lawsuits, and we cannot assure you that the ultimate outcome of these or other actions will not have a material adverse effect on our financial condition or results of operations.

IMO, I could only speculate in owning IMPHP shares. I think the IMPHO shareholders that tendered their shares screwed the current holders in seeing a victory in the lawsuit. The liquidation preference means nothing to me. IMPHP's value to me can only come from a victory in the court room, or a settlement with the IMPHP holders. If I was the lawyer, and I think the court's rulings so far supports it; I would remove the holders of the IMPHO shares as party to the filing...remove them from the class. Harsh, but that is the way I see it.