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Napanee, Ontario | I'm sure Steve will be along to accuse me of being in denial, or defensive and underwater on a truck load of high priced ground, but here's my take.
These are equity instruments, and not the actual land.
I.e. when FPI did their IPO, it trdaed at nearly 2x book value - ie, double the price their underlying land is on the books for. That is a lot of goodwill to work with in a land holding company. But no surprise since the underwriteres hype out as much intagible value as they can before dumping it on the IPO market- at best, a company might be fairly priced on IPO. If you look at most companies' post IPO performance, it usually isn't pretty.
Gladstone is in a simliar situation - still trading at a 70% premium to their asset price. Clearly the market doesn;t like the amout of goodwill the underwiters priced into these stocks. Galdstone's biggest catalyst for the decline was their dividend cut back in January - they were paying the yield out of their IPO money, likely to keep the price high until the lockup expired (SEC hello...?) then slashed it when folks took a closer look at the cash flow and realized it wasn;t sustainable. Unless they kept selling stock or debt... which a lot of these REIT's do.
Also, last thing - these are both small cap, and what the market would label - "spec stocks". Both less than 100 million market cap. Less than $500k a day turns over in these things. Very thinly traded. Anyways, the key takeway here is don't get the equity confused with the asset.
Edited by OldMcdonald 8/20/2014 07:44
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Farmland investments take a hit
