American Capital Offers Shares

American Capital Agency Corp. (AGNC - Analyst Report) recently issued a public offering of 43.2 million shares worth approximately $1.2 billion. The offering is expected to close on June 28, 2011. In a bid to cover over-allotments, the company will provide a 30-day option to the underwriters for purchasing an additional 6.5 million shares.

American Capital intends to utilize the proceeds generated from the transaction for acquiring other agency securities and 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, American Capital’s cash position stood at $300.6 million.

During the first quarter American Capital reported earnings of $1.48 per share compared to $2.13 in the year-earlier quarter. Excluding one-time items, recurring net income for the reported quarter was $1.30 per share.

American Capital is a real estate investment trust (REIT) that focuses on investments in mortgage pass-through securities and collateralized mortgage obligations (CMOs). American Capital invests only in fixed-rate agency securities where payments are guaranteed by the U.S. government or government-owned entities.

The company’s focused investment approach is not distracted by originations, servicing, or credit risk from investments in mortgages that do not have the backing of the U.S. government.

American Capital currently retains a Zacks #3 Rank, which translates into a short-term Strong Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, MFA Financial, Inc. (MFA - Snapshot Report) currently retains a Zacks #3 Rank.

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