Dear Subscriber,

Just a quick update on VTIQ VTIQ/U and NGL.PC

Those of us who hold VTIQ or VTIQU shares got a "tender offer" from a hedge fund today for $10.50 via your broker.

Trust me...This is an old trick in hedge fund land--by those sketchy funds at the bottom of the barrel.

The MO is as follows: 1) start a rumor about a company (in this case, a delay of the reverse merger past the end of June) and 2) make a tender offer for the stock at an absurdly low price. 
The broker has to distribute the tender offer to all shareholders of record.
The idea is you shake up a few folks and they panic and accept your tender.
It's all bullshit.

I just talked with the head of Investor Relations a short while ago and pointed this out to her--they had no knowledge of the tender. She explained that IF they anticipated a delay of the merger, they would have already filed that news with SEC in an
8-k filing.

Because they DID NOT, she shared that I could assume this news was not valid. Remember, a valid tender offer occurs when an activist investor proposes buying shares from every shareholder of a publicly-traded company for a certain price at a certain time--and places funds in escrow or separate account to make good on the offer.

The tender offer investor offers a HIGHER PRICE per share than the company's current stock price, providing shareholders a greater incentive to sell their shares. 

This is a scam. The hedge fund is trying to get a very hot stock at a much lower price. The lowball tender offer is legal but BS. 

Note on VTIQ and VTIQU trading symbols. When you pull up the symbol on a brokerage platform, the symbol VTIQ has a (D) next to it. That is because of the fact that the VTIQ VTIQU and the $11.50 warrant VTIQW ticker WILL be delisted by the closing of the reverse merger.

The NEW ticker symbol will be NKLA. VTIQU owners will get 1) NKLA share and 1) NKLAW warrant in their account at the close of the reverse merger. NKLAW warrant will be redeemable in 5-years or less. 

Our Preferred NGL.PC Shares up nearly 50% In A Day?

That was certainly a pretty sight this morning--what happened? Well, what happened is EXACTLY what we assumed would happen with NGL the issuer--they cut their MLP dividend 72% yesterday...but the Preferred was priced as if it dividend would be cut as well.

Not a chance. First, with the dividend cut and capex cut, NGL has PLENTY of coverage to pay the preferred. 2nd the preferred coupon rate is a CUMULATIVE debt security meaning if the coupon payment is not paid, that payment simply is added onto following dividend payments.

But really, preferred stock issuers NEVER want to miss a coupon payment because their access to additional Preferred issuance would be severely curtailed (and the coupon rate of Preferred securities is almost always cheaper than straight debt so it represents a lower cost of capital, too). 

This is why we put together the 1) 120%+ covered midstream dividend plays who have announced NO DIVIDEND CUTS and the preferreds from MLPs that we assume WILL cut their MLP dividend 50% or so for the next few quarters but KEEP on paying their preferred shares at the full coupon rate.

We have a few more of these WAY oversold preferred shares to come in our $10k-a-Month Ultra Income portfolio.

UP 50% in a few weeks on preferred stock? Beats working! 

But remember--these once-a-generation dislocations and mispricings are what we are proactively taking advantage of! 

ALL preferred stock is issued at a $25 par value and the dividend yield is factored as a percent of that $25 par value. When times are back to normal, solid paying preferred paying coupon rates way above similarly rated bonds will sell at a premium to their $25 par value. THAT is why we also own preferred ETFs 50% below their $25 par value like PFFA PFFR and PFFL. 

PFFA Buy Under $18 with 17% Yield
PFFR HOLD --Yield from our <$15 Buy Under 14% 
PFFL Buy Under $17 with 15% Yield 

NEW Buy AMZA Buy Under AMZA $17 with a 19% forward yield.   

AMZA ETF from our friends at InfraCap cut its dividend 17% last week...and with the MLPs they hold, our model says those yields have bottomed and the values are 30-40% under fair value.  

When you own AMZA, you really own the Top 10 strongest Midstream MLPs in the country now at a 30-40% discount to the book value of the infrastructure they own! In these midstream MLPs, the biz model is based on "take or pay" fee contracts NOT nat gas or oil prices. Take or Pay means they pay a monthly fee to keep their space in the system.

Note: EVEN nat gas and oil producers who declare bankruptcy PAY they midstream bill. Actually the bank or other lender pays the midstream bill--one month in advance! It's just like USAC--it's only energy companies that get 100% shut down do they NOT pay their midstream bill. 

As the energy industry shakes out with the oil demand destruction down 30% from normal, NAT GAS consumption is down just 1-2%. But the better news is when 20-40% of shale wells are shut-in over the US shale fields (most need $40 oil WTI prices to be economic), the "associated gas" that is produced as a by-product of that shale oil production stays in the ground.

That is why we forecast US natty gas prices up 20-30% at least by the winter season as that "marginal gas production" is no longer in the market.   

In other words, there is a LOT more appreciation ahead as the energy industry goes through its 3rd melt-down BUST cycle since 87-90, 2007-2009 and 2014-2016.    

Toby