It's sometimes hard to work out whether price moves result from slipping secrets or irrational speculation. American Capital Ltd. is set to announce its quarterly results this afternoon following the close of trading. (Well, after the close of regular trading. After-hours trading will probably be very exciting for a few minutes while the numbers are freshly revealed.) In the days ahead, the shares have flirted with and passed $7 a few times, and at this writing the stock stands at about $7.06 or so. (Okay, $7.08. I'm not typing fast enough.)
For shares that were on sale for less than $0.60 in the first quarter of last year, this hasn't been a bad start to the shares' recovery. The shares' NAV remains well above the shares' price, and the quarterly announcement should provide the world with a new view of the shares' discount to NAV. The trend has been increasing NAV, and this quarterly announcement will serve an important function in illustrating the extent of that trend.
Although ACAS has been paying down its refinanced debt, we haven't yet heard an announcement on the company's goal of reducing the debt past the interest-rate lowering threshold. Information on the timing of that milestone – an event that will improve NOI by reducing the cost of the debt with which ACAS finances its investment portfolio – should be in the earnings call even if the announcement isn't that it's been completed.
I for one will be interested in looking at ACAS' NOI, average interest rate on debt, and any announced transactions. I prefer to see ACAS making money through NOI than to see it relying on selling portfolio companies at a time they are likely undervalued. With debt-refinancing expenses a thing of the past, many millions per quarter will be brushed from the bad column and net should be buoyed by the vanished nonrecurring expenses associated with the long-running refinancing effort.
Although ACAS has some interesting exits planned – like the Mirion IPO – I am much more interested to see what ACAS is buying while the world of illiquid portfolio companies is on sale.