Two Harbors Investment Corp. (TWO), a real estate investment trust, recently issued a public offering of 20 million shares worth approximately $208 million, at an average price of $10.40. The offering is expected to close on May 31, 2011. In a bid to cover over-allotments, the company will provide a 30-day option to the underwriters for purchasing an additional 3 million shares.
Two Harbors intends to utilize the proceeds generated from the transaction for acquiring financial assets and residential mortgage-backed securities (RMBS) and for other general corporate purposes.
This public offering will enable the company to attain financial flexibility and seize investment opportunities and acquisitions, which go a long way in enhancing top-line growth. As of March 31, 2011, Two Harbor’s cash position stood at $302.3 million.
During the first quarter of 2011, the company reported core earnings of $14.8 million or 32 cents per share compared with $9.9 million or 36 cents per share in the prior quarter.
Two Harbors Investment Corp. is a Maryland-based corporation focused on investing, financing and managing residential mortgage-backed securities (RMBS) and mortgage loans. The company’s portfolio includes Agency RMBS and non-Agency RMBS. Agency RMBS are those whose interest and principal payments carry guarantees from federally chartered entities such as Freddie Mac or government agencies while non-Agency RMBS are those that are not issued or guaranteed by such government entities. As of March 31, 2011, the total value of the company’s portfolio was $3.0 billion including $2.4 billion of Agency RMBS, $83.0 million of Agency derivatives, and $525.0 million of non-Agency RMBS.
Two Harbors currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Redwood Trust Inc. (RWT) currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.
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