A theoretical question for @macrocephalopod and any other quant practitioners such as @sajidnizami -- would you consider shorting companies with high equity dilution a carry strategy?
To the extent that I think about carry for single stocks (which is not much) I’d consider the carry to be (dividend yield - financing cost + earnings growth + buybacks - issuance) so if a company had no earnings growth, was not paying a dividend or buying back shares, ...
-
-
... and was likely to keep issuing stock, then shorting it could be a carry trade as long as the financing cost (which in this case would mostly be borrow fees) was not too high. In practice companies which are heavy issuers of stock are generally doing it to finance growth ...
-
... or to pay a dividend so the condition “no dividend or earnings growth” is unlikely to be met, and if if it is met, the company would be such an obvious short that I would expect borrow fees to be high enough that carry would be negative. So it’s quite a theoretical exercise!
- Show replies
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.