$FRC Trade idea

Submitted by Famous_War5848 t3_126ymob in wallstreetbets

Am I crazy for thinking that buying $FRC preferred is a good idea? They announced they aren’t looking for a buyer. It seems that the backstops have been mostly effective.

If FRC does end up getting bought buy another bank: The preferred will either keep paying, or get redeemed at $25 a share. Currently trading around $6.

How flawed is my thought process

22

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VisualMod t1_jebl1nv wrote

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VisualMod t1_jebl2b1 wrote

>I do not think your thought process is flawed. I believe that buying $FRC preferred is a good idea.

8

cao22cao t1_jebo5yt wrote

Are you sure that preferred shares will be redeemed at $25…?

1

rwang411 t1_jebrucm wrote

It’s currently trading at $14

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KenGriffinsDaddy t1_jebrvzy wrote

You fucking clowns don’t quit pushing this FRC shit hey? 😂

−9

One_Alternative_6965 t1_jebtqy0 wrote

Wtf is going on? Post 25 of this absolute 🗑 bank. Smells like desperation. Holy shit, like stfu with this dogshit. Short FRC for free money.

−14

i_k_n t1_jebx890 wrote

Yup. My bags are heavy too.

−5

fenriswulfwsb t1_jec3fse wrote

FRC has found a pretty convincing floor. Unless we get bad news, it'll probably slowly edge up. Earnings (two weeks) may be a big opportunity as it will give us the first real window into if they were affected as much as the fear mongering indicated.

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cbusoh66 t1_jecc3rz wrote

And yet another FRC post from someone who has no clue what their balance sheet looks like, no one does anymore, and any past performance is mute at this point.

3

Potato_Octopi t1_ject13x wrote

Nah, same play I made. Did the same with BAC back in 2008ish.

4

dwinps t1_jeczyvp wrote

It could also go to $0

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FTRFNK t1_jed05t1 wrote

Ooof, I went down a rabbit hole about their preferred stock and you better understand what you're getting into. It's non-cumulative redeemable. Meaning if they miss a dividend they aren't obligated to pay any missed dividends and redeemable means they are redeemable at a price set in their prospectus at or beyond a specific date. Looking at this is super interesting but also incredibly boring because to know what you're getting into you need to read the prospectus and understand the terms. Interesting though in that the redeemable price is set in stone in the prospectus and unless they go bankrupt they can't redeem it for any less. There is also like 5 current sets of preferred at different dividend payout rates. I, H I know for sure and like 3 others.

I need to really look into it more, BUT if they don't go out of business looks like a guaranteed eventual 4x because I'm pretty sure the prospectus set the redeem rate of all the currently issued preferred stock in the 20's. With that said I'm a complete novice in this area and could be wrong. You'd have to read and jnderstand the prospectus.

I think the play would be to find the highest dividend rate within a reasonable redeemable window (I is redeemable at or beyond June 30 2023 for example, I believe) and buy those because they will be redeemed first when interest rates go down and they can issue a new set at a lower rate. Again, this is a first looksie, novice take.

Also, you're senior to common stock but junior to bondholders. You may get something in the event of going under, but depends on a few factors.

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PhillyChapter9 t1_jed0rpx wrote

After the FDIC deal with first citizens for SIVB what is the incentive for anyone to buy FRC? Let it blow buy the performing assets, get a below market fdic loan rate, and let the fdic share in any losses. Why would anyone take on the risk themselves if they can potentially get that deal after a failure?

1

Ok_Cockroach_7207 t1_jed3o27 wrote

The idea that the market cares what price you got in is ridiculous. Wait for an anchor point just like everyone else before you go trying to catch the absolute bottom like a lunatic and have no capital to spend for like 3 months.

1

throwawaydonaldinho t1_jeeaobf wrote

The PFF rebalancing is tonight. Blackrock’s massive preferred fund so they might end up dumping them or buying more but either way a sharp move is possible to whatever direction.

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sigmalabrador t1_jeek1wo wrote

Replying to FTRFNK (#2,513,055)

Thoughtful post, The low price of the preferred shares reflects the extreme bearishness on FRC. Back in 2008, there were a ton of financial preferred shares that traded down to single digits. Those that survived recovered above $20.

These securities were created for the retail investor and were issued at $25 par value.

What to look for to see a regional bank rally?

Focus on interest rates, lower rates cure a lot of problems. Unlike 2008, it's not an issue of credit quality, at least not yet.

Will the regulators offer any relief in the form of higher FDIC guarantee limits? There has been some talk of increased regulation of the regional banks to insure their soundness. Increased regulation could be offered along with an implicit guarantee of the regionals. Long-term this will hurt regional banks ability to lend.

Will the Biden Administration allow big banks to buy regionals? Watch First Horizon/TD Bank merger in the next few months.

2