How to Buy Four Springs Capital Trust Stock

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Contributor, Benzinga
January 19, 2022
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During the immediate onset of the COVID-19 pandemic, widely distributed images of major cities across the world appearing like veritable ghost towns sent shivers down the collective American spine. Due to the intersectionality of movement inherent in a globalized economy, it was a mere inevitability before the U.S. would incur a similar fate.

Making matters worse of course was the lack of a tangible culprit. While scientists may first discover the existence of a biological threat in a particular region, avoidance of associated people and products is an exercise in unproductivity and futility. Unlike the arbitrary and capricious measures that human societies deploy to distinguish themselves, viruses show no partiality to princes.

In turn, Arjun Ramani and Nicholas A. Bloom of the Stanford Institute for Economic Policy Research argued in January 2021 that the COVID-19 crisis was creating a “donut effect” in the real-estate market. To succinctly condense their extensive analysis, the researchers argued that the mass work-from-home experiment artificially increased demand for suburbs while limiting relevance for commercial properties, thus hollowing out urban centers.

But later last year, declining fears of COVID-19 combined with retail revenge saw an explosion of demand for social experiences. Therefore, the unique circumstances of the pandemic could boomerang back to normalcy for Four Springs Capital Trust.

What Is Four Springs Capital Trust?

A real-estate investment trust (REIT), Four Springs Capital Trust focuses on single-tenant income-producing businesses that mainly center on the industrial, medical, service-related retail and office properties. In this manner, Four Springs organically attracts clients willing to sign long-term net leases.

According to the company’s website from data relevant up to Nov. 15, 2021, the REIT commands 154 properties across 32 states and consists of contracts with 68 tenants. Furthermore, Four Springs features a 99.8% occupancy rate.

Most of the REIT’s properties are concentrated in the Midwest and the South. Texas also features prominently although coverage on the west coast is limited. Major clients include Dollar General Corp. (NYSE: DG), Domino’s Pizza Inc. (NYSE: DPZ) and FedEx Corp. (NYSE: FDX).

When Is the Four Springs Capital Trust IPO Date?

Under heavy watch because of analysts and individual buyers gauging the strength of the initial public offering (IPO) market — or the first time private enterprises distribute their shares to retail investors — Four Springs Capital Trust is scheduled to make its debut on the IPO calendar on Jan. 20. Shares will trade on the New York Stock Exchange under the ticker symbol FSPR.

As usual with any other new listing, Four Springs will likely price its deal one day before it launches. Management expects to raise $252 million through the offering of 18 million shares at $13 to $15 each. At the midpoint of the estimated pricing spectrum, the REIT will command a fully diluted market value of $603 million.

Also noteworthy is that Four Springs intends to offer a 3.5% yield at the middle of the range. A long list of powerhouse financial institutions will represent the joint bookrunners for the IPO, including Morgan Stanley (NYSE: MS), Goldman Sachs Group Inc. (NYSE: GS), Wells Fargo & Co. (NYSE: WFC) and Mizuho Financial Group Inc. (NYSE: MFG).

Although an exciting opportunity from its burgeoning relevance partially stemming from consumer hunger for in-person social experiences, the timing of Four Springs’ public market debut will be carefully analyzed. According to records with the U.S. Securities and Exchange Commission (SEC), the REIT filed multiple documents with the regulator in 2017 regarding its public ambitions before withdrawing in July.

Now, it’s back in the hunt again, although during much more ambiguous conditions. From a collective sentiment standpoint, FSPR stock is entering the arena right after a blistering, record-breaking season where U.S.-based IPOs delivered total value exceeding $301 billion during 2021. Factor in international new listings, and this figure skyrockets to over $594 billion.

To be fair, the gambler’s fallacy concept works both ways; that is, merely avoiding public market debuts simply because the prior years’ IPO sector (2020 was also a strong year) hit unbelievable heights doesn’t automatically impugn what may occur this year. So far, the segment has been robust, with multiple offers covering a range of viable industries.

However, stock trading on margin — one of the key signs of investor risk appetite — is near record highs. Should the market rotate out of leveraged positions, this circumstance could impose downwind impact on the IPO sector, restricting capital on new listings and perhaps promoting volatility.

Four Springs Capital Trust Financial History

While sticking your neck out for an IPO is always risky due to lingering concerns of the unknown — perhaps not dissimilar to what surfers ponder regarding what lies beneath the waves — an element that provides some measure of confidence is Four Springs’ strong financial backing.

In January of last year, the REIT disclosed a $50 million investment originating from Goldman Sachs’ Vintage Funds, the investment bank’s private-equity arm. Later in May, the Global Credit platform under Carlyle Group Inc. (NASDAQ: CG) inked a deal to provide up to $300 million in growth capital to Four Springs, thus affording FSPR stock a magnitude of financial undergirding that is well beyond average.

On the numbers front, the REIT delivered pro forma revenue of $72.8 million in 2020, a substantial improvement from 2016’s unaudited revenue tally of $19.3 million (from the company’s IPO prospectus filed in 2017). More recently, in the 12 months ending Sept. 30, 2021, Four Springs rang up $49 million in top-line sales.

However, the focus moving forward will be the REIT’s potential relevance in the post-pandemic era. Per its website, Four Springs’ portfolio by industry breaks down as follows:

  • Industrial: 39.6%
  • Retail: 30.8%
  • Medical: 22.2%
  • Office: 7.4%

Naturally, the medical services industry should benefit in the years ahead as acclimatization to COVID-19 incentivizes a returned focus to addressing chronic conditions — a matter that the country is just starting to recognize the severity of. However, the vast majority of Four Springs’ revenue stream centers on industrial and retail segments, which could be curious.

On one hand, increased demand for same or next-day deliveries boosted the profile of industrial real estate as expanded distribution centers can help facilitate this service. However, it’s not entirely clear if this demand surge is sustainable. Primarily, e-commerce transactions as a percentage of total retail sales show a conspicuous erosion. From a high of 15.7% in the second quarter of 2020, this metric dipped to 13% in Q3 2021.

Thus, the data confirms the underlying social catalyst of the retail revenge concept, which may inadvertently counteract the growth narrative of the industrial segment.

Four Springs Capital Trust Potential

If you cut an imaginary line from the Dakotas to the south of Texas, you can clearly see that Four Springs’ coverage features an eastern bias. Subsequently, this bias may be a fortuitous one given multiple stories about how people from the west coast — particularly California — are fed up with the high taxes and ridiculous living costs.

Still, the concept of an exodus out of California to eastern pastures may be overexaggerated. Instead, people may not be moving into the Golden State from other parts of the country because of the COVID-19 pandemic and associated economic headwinds. But if conditions return to normal, western states could look attractive. Furthermore, should companies demand in-office workers again, pandemic-fueled migration patterns could shift abruptly, thus leaving Four Springs possibly vulnerable.

How to Buy Four Springs Capital Trust IPO (FSPR) Stock

Should you choose to acquire FSPR at the open, you’ll need to know how to buy stocks. Below are some key pointers.

Step 1: Pick a brokerage.

With the best brokers competing on similar incentives, you should figure out which platform ideally suits your needs.

Step 2: Decide how many shares you want.

IPOs always carry the risk of multiple unknown variables. Therefore, participants should elect a balanced share count.

Step 3: Choose your order type.

Before trading, learn these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

FSPR Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

FSPR Pre-IPO

Unfortunately, pre-IPO access status for FSPR was unclear at time of writing.

A Budding Opportunity or an Early Winter?

As society gradually acclimates to the post-COVID environment, the normalization of commerce should bode well for FSPR stock. Nevertheless, what economic cards are eventually laid out may pose long-term concerns for the REIT.

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About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.