Thoughts on open market supply/demand and series C preferred stock
It's been a bit painful to see the stock in a slow but very constant drift down. IMO it's well worth considering that sales of the C preferreds have removed a significant amount from the demand side of the market trading because those purchases are made directly from the company and fund the company rather than being part of the balance of buyers and sellers in open market trading. 885k Cs equivalent to 22M common shares were purchased in Q4. That's a lot of demand to remove from the open market for the stock considering that an average day's trading in less than 1.5M shares. Enough to have a visible impact on the open market for the shares.
On the one hand sale of the Cs have provided equity funding to the company at very good terms and very low cost which is great! But at the same time, taking that demand for shares out of the market trading, IMO has also clearly had the downside effect of tilting the open market supply/demand balance hence putting constant downward pressure on the stock to whatever extent that sales of the C preferreds has been non-trivial on an ongoing basis.
A few posters here have posited that buyers of series C shares were flipping, i.e. selling common shares and replacing them with C shares because the C shares were being sold at a small discount to market. I doubt that very much. Several reasons: only accredited investors can buy the preferred C shares. That means people with steady annual income of over $200k or assets in excess of $1M excluding home equity. I believe that these individuals are likely to be investors, not petty traders. Also I spoke to one accredited investor who was offered a price for the C shares that was less than 5% below daily closing price. He said there was no way the discount was enough to cover the risks of trying to sell a large number of common shares and then use the proceeds to buy the preferred.
