Genie Energy (GNE) reported yesterday that will renew its offer to exchange common shares for preferred shares (GNE-PA). I reported about the interesting exchange offer last month.
To recap the offer, investors have the right to exchange their common shares on a one to one basis for the preferred shares. The preferred has the following features:
- Has a liquidation preference of $8.50 per share.
- Annual dividend of $0.6375 per share.
- Redeemable following October 11, 2016 at 101% of the Liquidation Preference plus accrued and unpaid dividends.
- Redeemable following October 11, 2017 at Liquidation Preference plus accrued and unpaid dividends,
- Genie does not have to redeem the issue at all.
- It is senior to the common shares.
This presents an interesting option because the common stock is trading around $6 and the preferred is trading around $7. You could potentially buy the shares of the common stock at $6 and exchange it for 7 after conversion.
Obviously, you could short out the preferred. However, there is not much liquidity on the preferred.
I was able to buy shares at $6.01-$6.15 this morning. I expect the common and preferred to converge.
At current common stock price ($6 and change), you are getting a yield of over 10% (.6375/6). Like I said, they should have no problem paying interest on the preferred for a while, since they have a strong balance sheet.
Disclosure: I am long GNE