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Friday, September 19, 2008

MREITs Shafted by SEC

So the SEC is going on a tirade against short-selling after public pressure forced them to do something. So exactly how and why were the 799 financial firms selected for the temporary short-selling prohibition chosen? Granted, most of the companies on the list on bank holding companies, which makes sense. However, there were a few oddball choices, such as Apollo Investment Corp. (AINV), which is a business development company, and FBR Capital Markets (FBCM). None of the mortgage REITs, which are vital to loan origination in the primary market and a significant source of purchases in the secondary market, made the list. Aren't these financial firms as well with "frozen" assets on the balance sheet? While it's true that taxpayers aren't on the hook if an mREIT goes under, taxpayers aren't on the hook if Goldman Sachs (GS), Morgan Stanley (MS), or FBCM goes under either.

If public interest demands that we curb short-selling (a dubious proposition in itself, but that's a separate rant), we should extend the ban to all publicly-traded companies. Let's just artifically prop up everyone's stock price.

15 comments:

Anonymous said...

Thank you very much for your posts!

Can a company continue to qualify as REIT while suspending dividends until Retained Earnings (Accumulated Deficit) come from negative to zero? I saw in the balance sheet of SFI that in 2007 they had Accumulated Deficit of $700M, yet they have continued to pay dividends. What do you think, would it have been better for SFI to stop paying dividends in 2007 until they have zero Accumulated Deficit? I guess that the management was preoccupied with the stock price that they could not suspend dividents while experiencing hard times, but in the long run, if they had $700 more cash, the stock won't have fallen to $1.75?

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Is it possible for a company to continue with this rates

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