Piedmont's Third Tranche Release
The third tranche in Piedmont's listing is occurring this week, as shares are being delivered to custodians. This likely explains Piedmont's (PDM) small price drop over the past two days. All Piedmont shares should be full listed by February 2011. Remember that the breakeven price per share is $25.14. The current price is approximately $18.20 per share.
I don't want to jinx PDM's shares, but with one more tranche release left, it looks like Piedmont's strategy of spacing share liquidation has helped stabilize the stock. Rightly or wrongly it appears that deferred liquidations are the new model for sponsors that are looking for liquidation. The IMH deal I wrote about over the weekend is spacing its sales, and another large REIT is contemplating using the tranche method, but over an 18-month period compared to Piedmont's which took about a year.
It's not the tranche strategy that stabilized Piedmont's share price, it is a good underlying business. Entities with shaky business models or suspect financial statements won't have the same results as Piedmont. The results could be just the opposite of Piedmont's, where a stock's price drops after the initial IPO and continues to drop, especially before and after each tranche release, until all shares are liquid or the company suspends tranche releases in an attempt to halt liquidations. Investors will be in a frenzy to sell if a company is trending down.