participants in an offering by selling them stock only to come

New York Mortgage Trust May Roll Craps On February 4, I wrote this article discussing how NYMT was very close to doing a secondary offering and that investors should sell before the deal and buy back Women Ralph Lauren Sweaters at a lower price afterward. On the day that the article was published, the stock price dropped from the open at Women Ralph Lauren 7.15 to the close of 6.85. In my opinion, this effectively prevented NYMT from doing the secondary. Since book value at the time was 6.52, the stock was only 5% above book at the close. This isn't enough of a premium to book to issue the secondary and attract significant participation. After the cut to Women's Puma Usain Bolt Shoes cut to the broker, the deal would have been dilutive to book.Further, unbeknownst to us investors, the company was in the middle of a "bad quarter". In my opinion, it did not want to Women Ralph Lauren Hoodies upset the would be participants in an offering by selling them stock only to come out shortly thereafter with an earnings miss. NYMT does not want to upset its participants, because they need to keep going back to the trough Mens Puma Suede shoes for more capital. The strategy is extremely capital intensive, and I expect at least 4 additional stock offerings in 2013. It did 4 offerings last year, and it shows no sign of stopping now.A lot has happened over the last 6 weeks, and I am now aggressively shorting the stock.First, there was the earnings miss. In Q4 2012, The Street expected 25 cents, and NYMT came in at 19 cents. In conjunction, book Mens Puma Pace Cat 691 dropped from 6.52 to 6.50. Spread compression and prepayment acceleration were largely responsible. In Q1 2013, interest rates have moved up. This will cause spreads to widen but it will also cause book value to take another hit If the quarter ended today, I estimate Kids Ralph Lauren Dress book would drop to 6.38 or lower.Second, the company is low on cash. The 8 K shows only $32 million of cash as of December 31, 2012, and the company has been continuing to buy securities since Mens Puma Baylee Future Cat then, as discussed on the quarterly conference call. It delayed doing an offering until Q4 results were out. In my opinion, it will delay a little further, because it is about to pay another dividend. It won't issue stock right before the dividend, because that would only send more money out the door. However, in my opinion, the company will do a deal immediately after Mens Puma Basket Shoes the ex div date, which will occur in the last week of March. Management has openly stated they want to aggressively grow the company and have been doing so over the past year. They will continue. The more they grow, the more they can pay themselves.Third, the valuation has gotten excessive. At a recent price of 7.55, the stock is 116% of stated book and 118% of my estimate of current book. This is way out of line with the company's history and with other mortgage REITs. Here Women's Puma Ferrari Shoes is a sampling of some other REITs and their Price/Book ratios:Retail investors, why do you think the yield is so high? Do you think you are getting a "free lunch"? Do you think NYMT somehow has access to superior assets that are more favorable in terms of risk/reward? That nobody else can get these superior assets only NYMT can get them? Which brings me to my next point.Fourth, the company has taken on substantial risk. (Think about it how else would NYMT be able to pay out such a high dividend?) 116% of book is a lot to pay for a company that has taken on the extreme risk that NYMT has, as it has exponentially grown its portfolio over the past year. The carrying value of NYMT's investments has tripled going to $1.485 billion at year end 2012, from about $425 million at the end of 2011.Now NYMT is somewhat unique among REITs in that it takes on a combination of credit risk and interest rate risk whereas most REITs focus on interest rate risk alone. But the problem with credit risk is that it doesn't show up right away. Debt instruments do not default immediately after they are issued. It takes awhile for a problem to show up and turn a loan bad. But NYMT buys the riskiest loans to get the highest yield. Any small problem could jeopardize the principal. For example, in the last conference call, Steve Mumma, President, said