NEW YORK (TheStreet) -- Shares of American Realty Capital Properties (ARCP) are up 6.13% to $9 in pre-market trade after activist investment firm Corvex Management LP reported a 7.1% in the U.S. real estate investment trust that has plunged since disclosing accounting errors two months ago, according to Bloomberg.
Corvex, run by former Carl Icahn protege Keith Meister, has accumulated about 64.7 million shares, including stock underlying call options, the firm said in a regulatory filing. The New York-based company paid about $71.1 million for the 7.925 million owned shares and $158.1 million for the options, according to the filing.
American Realty Capital Properties has declined 32% since revealing on October 29 that it had accounting errors that were intentionally concealed, leading to the resignation of its chief financial and chief accounting officers. Three of the company's other top executives resigned two weeks ago, and the REIT is reviewing its capital structure and dividend policy, Bloomberg reports.
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Corvex said that it has had talks with ARCP's board to discuss adding a representative and ways to boost value, Bloomberg noted.
New York-based ARCP is the largest owner of single-tenant U.S. buildings, with more than 4,000 properties across the country. The company said it has had "constructive conversations" with Corvex, Bloomberg said.
Separately, TheStreet Ratings team rates AMERICAN RLTY CAP PPTY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICAN RLTY CAP PPTY INC (ARCP) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for AMERICAN RLTY CAP PPTY INC is currently extremely low, coming in at 6.89%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -10.55% significantly underperformed when compared to the industry average.
- ARCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 34.62%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- AMERICAN RLTY CAP PPTY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AMERICAN RLTY CAP PPTY INC reported poor results of -$2.34 versus -$0.47 in the prior year. This year, the market expects an improvement in earnings (-$0.72 versus -$2.34).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 44.0% when compared to the same quarter one year prior, rising from -$71.96 million to -$40.33 million.
- You can view the full analysis from the report here: ARCP Ratings Report