What would you do with your Ares Capital Corp transferable rights?
Ares (sym:ARCC) has issued transferable rights (sym:ARCCR) to its shareholders which may be sold, exercised or just ignored. Particulars here: http://biz.yahoo.com/bw/080324/20080324005611.html?.v=1
I have the right to buy 100 shares at a 5% discount to the average market price over last 10 trading days before cutoff date - April 21st, but trade must take place by April 18th. My options look like:
1. Sell the rights for about $50 after commission (a little beer money).
2. Exercise for 100+ shares if the price is moving upward the last couple of weeks.
3. Pass on exercising and sell rights for less beer money the 18th if the price is trending down to the point that it would be cheaper to just buy more at the then market price.
Additional info: Ares has been trending down the past year and probably won't be reversing till economy does. This will be a long term hold for dividends and appreciation and is in my Roth IRA.
Have I missed any options? What would you do with these rights?
Best Answer
957 points
CUWu answered one year ago …
If you don't exercise the thing to remember is that you'll be diluted anyway -- think of all the people, management included, who will exercise. Depending on how many new shares are outstanding after that, you'll own comparatively less of all future earnings and dividends the company pays out.
Therefore, if this is a long term holding I really encourage you to think about exercising the right and keep yourself from being diluted. But then again, I don't know much about this company itself -- does it appear that it'll remain solvent? Or are we looking at a company that might not be here in 5 years? If you feel pretty confident that this company isn't headed for the "stock grave yard" then you might want to think about sticking it out.
I obviously can't make a recommendation either way but I hope I gave you some new food for thought as I didn't see the dilution factor in your question above.
Good luck!
