Obviously BAM thinks RSE is cheap at 15 and figures it will end up paying more if it were buying on the open market. BAM will also not be putting pressure on the shares by selling in the open market. Downside risk is limited.
Just because the stock is cheap doesn't mean that we should buy it. Stock can stay cheap (or expensive) for many years. However, I think there is a catalyst in place in that the company (once it completes its tax return) will elect to become a REIT. With a dividend in place, we should see increased interest in the stock. The second catalyst (and most obvious) is BAM at some point offers to buyout the company at a nice premium to the current stock price. I do not expect nor do I view this as a catalyst simply because BAM just participated in the rights offering. Why do the rights offering if you were planning on making a takeover offer in the near future?
RSE most recent 10k (3/292011)
On March 26, 2012, we completed a rights offering and backstop purchase. Under the terms of the rights offering and backstop purchase, we issued 13,333,333 shares of our common stock at a subscription price of $15.00 per share. Net proceeds of the rights offering and backstop purchase approximated $192.0 million. In connection with the rights offering and backstop purchase Brookfield Asset Management Inc. and its affiliates ("Brookfield") owns approximately 54.38% of the Company.
I didn't come up with this idea and there is more detailed discussion and analysis that can be found below
I love real estate investment trusts like RSE. Because of the income dividends along with the increasing value of brick and mortar buildings over time.
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