The investment in MCG Capital investment which has turned out to be a success. In November 2014 (prior to the inception of this blog), I had made three investments that were corporate action driven special situations. One of them was MCG Capital entered into in at $3.68. Given management's actions (tendering for over 50% of the then-outstanding stock below NAV, rapidly liquidating loans over several quarters, withdrawal of SBA licenses, etc. to name a few) and the presence of motivated shareholders, there were indications that the company would either be liquidated or sold, both of which seemed likely to happen at prices higher than where the stock traded.
On April 29, 2015, MCG Capital announced that it was being acquired by PennantPark Floating Rate Capital Ltd for consideration valued at $4.75. I have liquidated this position to look for other cheaper securities.
I had a high probability estimate of what would happen but the timing of the merger was pure luck and I had no indication it would be so soon. As a result, the total return on this investment has been 23% over the six months since November. This overstates the true economic result because short term capital gains taxes will be due.
If you are invested in this security, please take a look at the merger announcement, consideration, the attractiveness of PennantPark Floating Rate Capital (PFLT) stock to reach your own conclusions.
Under NO circumstances should any content or communication here be construed as investment advice or a recommendation to buy or sell any security, whether expressed or implied. Factual statements are believed to be truthful and reliable, but are not warranted against errors or omissions. PLEASE do your own due diligence prior to investing.
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