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Actionable news in NYMT: New York Mortgage Trust, Inc.,

What Should New York Mortgage Trust Do To Cure The Discount?


New York Mortgage Trust suffered from a very inefficient share price that demonstrated extreme discounts to book value.

Since the huge drop in share price there has been a substantial rally that brought NYMT to be almost in line with peers.

One thing NYMT could do to encourage a higher valuation from shareholders is to emphasize easy access to data on their portfolio.

They disclose at least some of the specific positions they are holding but they could go much further by keeping current information on the website.

New York Mortgage Trust (NASDAQ:NYMT) was recently trading at a staggering 36% to 40% discount to last reported book value. Since then shares have rebounded sharply to trade at about a 23% discount to last reported book value. In my previous work I explained why discounts to last reported book value require some significant adjustments to create meaningful estimates. This time I'm going to demonstrate the changes that I believe NYMT could make to substantially improve their share price. I want to stress that these changes don't involve a major change to the portfolio, but they should impact the level of returns investors require.

Does that sound a little strange? When some mREITs trade at substantially larger discounts than others it suggests that investors (as a group) are concerned about the mREIT and are demanding larger returns. One way to solve the discount is to convince shareholders that the mREIT should be treated similarly to peers.

With a 23% discount to book value NYMT is only trading at a moderately larger discount to Q4 book value relative to peers, but it still isn't the kind of strong pricing power they demonstrated in previous years.

Take the Perspective of the Shareholder

The first thing that management needs to do is put themselves in the perspective of an educated shareholder. Since you're reading this article, you probably fall into that group. Educated shareholders are the ones that are holding the company and have researched the assets in the portfolio and the performance of the company in at least a couple prior periods.

For NYMT the retail shareholder is the most common type and their portion of ownership is increasing:

The low level of institutional ownership is problematic. The institutional...