Tough Environment for New Preferred Stock Initial Public Offerings, February 2022

Current environment

The rate of change in preferred stock market prices is opposite to that of the rates. As rates rise and fall over time, prices also go down and up. This is why preferred stock investors have a constant swing between dividend income (when rates and prices are high) and capital gain income when rates and prices drop. This produces capital gains. CDx3 maintains the “CDx3 Perfect Market Index” which reacts to events in the stock market.

A CDx3 Perfect Market Index value 100 is a theoretical perfect market’ for CDx3 Preferred Shares. The average market price for a specific sample of CDx3 preferred stocks will be $25 when the preferred stock market is perfect’. This means that the average share price will be $25. A market favoring buyers indicates a value greater 100 (average prices are less that $25) and a market favoring vendors indicates a value less than 100 (prices are more than $25; buyers use the Over the Counter Stock Exchange to buy wholesale during periods of low/high prices).

Over the past ten-years, the CDx3 Perfect Market Index surpassed 100 only three times. Now, as we close the month of February we are once more. JustTouching 100:

As readers might have seen from the graphic at beginning of this article. Three of the four preferred stocks IPOs that were completed this month are now trading below $25 offering prices. If you look back at the four preferred stocks IPOs of January, you’ll see that all four are trading below $25 offering prices.

If a high-quality preferred stock crosses below its $25 offer price, it appears on our “CDx3 Bargain Table page” (for subscribers); the count and current trading prices of bargain table stocks are another great indicator of the condition of the preferred stock markets. As of this writing, there are a staggering 79 options. (We’ll be reviewing some of the recent crosses below Par later in the article. But first, let’s take a look at the four IPOs this month.

About the new issues

U.S. Bancorp (NYSE:USB)A new Series O non-cumulative preferred stock with a fixed dividend rate and a price of $450 million was priced. All four Moodys, Standard and Poor’s and Fitch rated these shares at Baa1,, BBB+ and A, respectively. S&P and Moodys both assigned a negative outlook, while Fitch and DBRS gave a stable outlook. The O series shares of the new O series will trade temporarily on OTC under symbol USBOV. They will then move to permanent symbol USB–S (NYSE:USB.PS)They will be listed on New York Stock Exchange. (NYSE:USB.PP)The company was offered at 5.5% in 2018, and became callable in October 2018. Finally, the company has two publicly traded shares. Variable rate preferreds, under symbols USB-A (NYSE:USB.PA)USB-H (NYSE:USB.PH).

CareCloud Inc., a healthcare technology company (NASDAQ:MTBC)The company offered $25 million in new series B cumulative preferred stock with a fixed dividend rate 8.75% and a price of $25 million. The company indicated it would redeem a portion of its previously issued 11% series A preferred stock using the proceeds. (NASDAQ:MTBCP). The new shares, which are unrated, do not have call protection and can be traded on the Nasdaq using symbol MTBCO.

Brookfield Infrastructure Partners L.P. (NYSE:BIP)An offering of perpetual subordinated notes worth $300 million was priced. It offered a fixed coupon of 5.125%. The company indicated that proceeds would be used for the redemption of its Series 7 Class A preferred unit (series 7) that became callable in March. Standard & Poor’s rated these new notes BBB-. They trade on the New York Stock Exchange as BIPI.

Prospect Capital Management, which also manages Prospect Capital Corporation, manages the non-traded Priority Income Fund. (NASDAQ:PSEC)An offering of $26 million worth new Series L preferred stock due 2029 at a fixed dividend rate 6.375% was priced. The company stated it would use the proceeds for new investments. Egan-Jones gave the new shares a rating BBB- and they will trade temporarily on the OTC under the symbol PRIFV, before moving to the New York Stock Exchange under the permanent symbol PRIF-L.

Sources: CDx3 Notification Service database. Preferred stock table.

SEC filings USB-S, MTBCO, BIPI, PRIF-L

Wholesale purchase of new shares

Preferred stock IPOs typically involve a temporary period during the course of which OTC trading symbols will be assigned until these securities are moved to their retail exchange. After that, they will receive their permanent symbols.

There’s no reason to wait. Individual investors can purchase preferred stock shares at wholesale prices, provided they have a web browser and an account for online trading.Preferred Stock Buyers Make Changes To Get Double-Digit Returns” to learn more about how the OTC can help you purchase shares at discounted prices

People who use the wholesale OTC to buy new shares at a lower price than $25 are better able to avoid capital losses if prices drop.

Once shares are converted to permanent symbols, your broker will update the trading symbols. An important note about preferred stock trading symbol: Unlike common stock trading symbols the preferred stock symbol format is not standardised by brokers, exchanges and other online quoting sites.

A Series A preferred stock may have a symbol ending with -A at TD Ameritrade or Google Finance, but the same security could end in PR.A. at E-TRADE or.PA. at Seeking Alpha. See the following table to see a cross-reference of 16 popular brokers’ preferred stock symbols. Cross-Reference Table for Preferred Stock Trading Symbol.

Past preferred stock IPOs were below par

Here are some recent dips/crosses that were below par for which CDx3 Notification Service subscribers got email notifications:

Note: Yellow highlighted entries signify eligibility for the CDx3 Bargain Table (one of our most viewed subscriber pages).

Until Next Time

CDx3 will provide monthly preferred stock (and ETD) IPO summaries. Additionally, we will look at some past preferred stock-IPOs that are trading below par. Sometimes the reward for imperfect preferred stock IPOs is very high relative the fully CDx3 compliant professionally rated securities.

You can decide if you are an investor who prefers preferred stocks with a CDx3 Compliance ScoreYou are rated 10/10, or if your portfolio can accommodate 9-score and lower securities. Stay tuned for future articles on new IPOs as well as interesting preferred stock activity. We appreciate your interest!