Interesting Opportunity With Genie Energy Ltd (GNE)

Page 1 of 2

After completing a share exchange offer that it initiated during the third quarter of 2012, Newark, New Jersey-based Genie Energy Ltd (NYSE:GNE) has renewed a similar offer for another tranche of common and preferred shares. The initial exchange offer involved the swap of about 1.6 million Class B common shares for an equal number of preferred shares in the company. Originally slated to facilitate the swap of as many as 8.7 million shares of Genie’s stock, this exchange ended on October 10, 2012. As a condition of the exchange, the company suspended the issuance of dividends on its common shares until further notice.

Several weeks later, the utility firm announced a new exchange offer that would involve an identical one-for-one swap of common shares for preferred shares. This new offer applies to as many as 7.1 million outstanding shares of the company’s common stock. This represents about 35 percent of Genie’s remaining outstanding shares. Although the offer was scheduled to expire on January 15, 2013, the company announced that it would be extended through February 6, 2013. Fewer than 200,000 shares have been tendered as part of the new offer.

Genie EnergyAbout Genie Energy Ltd (NYSE:GNE)

Genie Energy is a small energy company that operates several distinct divisions. Its power-distribution division sells electricity and natural gas to over 500,000 residential and commercial customers in the northeastern United States. Genie’s transportation division is responsible for bringing power-generation fuels like natural gas, conventional oil and shale oil from deposits in Pennsylvania, North Dakota and elsewhere to market on the East Coast. Finally, the company owns significant stakes in two shale oil and natural gas deposits in Israel and Colorado. In 2012, the company lost about $5.2 million on gross revenues of $194 million. It has indicated that it may try to find a buyer for its energy-exploration business.

How the deal is structured

Under the terms of the deal, Genie Energy will facilitate the exchange of its common shares for dividend-paying preferred shares on a one-to-one basis. The tendered common shares will be canceled. With the dividend on both classes of the company’s common stock canceled until further notice, the preferred stock’s 6.2 percent yield looks very attractive.

The preferred shares that are eligible for exchange cannot be redeemed by the company until October 11, 2016. After that date, they may be redeemed for 101 percent of their liquidation value of $8.50 plus the value of any accrued dividends. After October 11, 2017, they may be redeemed for 100 percent of their liquidation value plus accrued dividends.

Crucially, Genie’s CEO will not participate in the renewed share exchange. In fact, the exchange appears tailored to boost the per-share value of the holdings of the company’s senior management team. While the deal will also raise a significant amount of cash for the indebted company, this added perk has not gone unnoticed by shareholders and market-watchers alike.

Complications

There are currently no pending legal or regulatory actions that could have an adverse effect on this exchange. However, the relative lack of demand for Genie’s successive share swaps is illustrative. For starters, it may indicate that the company would face diminishing returns for any subsequent renewals of the exchange offer. This may speak to a relative lack of confidence that the company will be willing or able to pay its bills during the coming half-decade.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!