Thursday, May 31, 2012

MTGE's New Offering Defers ~42¢/sh

At Seeking Alpha, I show how the at-NAV issuance of the new MTGE shares gives shareholders a tax benefit akin to indefinite deferral of 42¢ of income, without requiring a tax-deferred account. This is a single-instance case of the hidden deferral available when ACAS-managed mREITs issue shares following the earning of taxable income.

Since ACAS is now a taxable entity, this indefinite deferral amounts to about 15¢ per MTGE share of income tax it won't pay (or tax asset it won't consume). With 2m shares, this is a $300k one-time bonus. ACAS has done this already this year (I didn't do the math on the first secondary offering), and will surely do it again at its managed fund. Growth in ACAS' holdings of MTGE work to its advantage both by growing its management fees and by growing the fair value of its holdings of MTGE.

Enjoy the new article!

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