Annaly Capital Management, a real estate investment trust that invests in mortgages, on Tuesday priced a $1.3 billion offering of stock, its second trip to the equity well within two months.
The New York firm plans to use the proceeds to buy mortgage-backed securities in the open market. If the underwriter overallotment is exercised, the stock sold would represent roughly 12% of shares outstanding including the January raise.
Sandler O'Neill & Partners LP called the timing of the offering a surprise "given the close proximity to a similarly sized raise in early January," but said market conditions are good. "Specifically, spreads are historically wide given a further steepening in the yield curve since yearend, and we estimate the shares were trading near 1.2 [times book value] given the decline in MBS prices since the beginning of the year."
Early Tuesday, Annaly's shares were down 50 cents, to $17.44, but still near a 52-week high. According to Sandler, "there has been a flurry of agency MBS equity raises in the past six months, which have increasingly been well received by investors, as the shares have generally performed well following the early morning weakness on the day after the offering was announced."
