Presidential Realty (PDNLB) Risk Analysis
Risk Overview Q3, 2023
Source: the company's latest filing for the period ended Sep 30, 2023, filed Nov 14, 2023
Risk Change Over Time
Risk Highlights Q3, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 29
- Share Price & Shareholder Rights - Risk 1We are subject to the penny stock rules adopted by the Securities and Exchange Commission ("SEC") that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our stockholders to sell their securities.
Rule 3a51-1 of the Securities Exchange Act of 1934, as amended, establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. This classification would severely and adversely affect any market liquidity for our common stock. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule required by the SEC relating to the penny stock market, which, in highlight form, sets forth: - The basis on which the broker or dealer made the suitability determination; and - That the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commission payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly traded. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our stockholders will, in all likelihood, find it difficult to sell their common stock.
- Share Price & Shareholder Rights - Risk 2Our common stock is thinly traded, so stockholders may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Currently, our common stock is quoted in the Pink Sheets OTCQB market and the trading volume the Company anticipates to develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in unlisted stocks and certain major brokerage firms restrict their brokers from recommending unlisted stocks because they are considered speculative, volatile and thinly traded. The Pink Sheets OTCQB market is an inter-dealer market much less regulated than the major exchanges, and our common stock is subject to abuses, volatility and shorting. Thus, there is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there. The trading volume of our common stock has been, and may continue to be, limited and sporadic. As a result of such trading activity, the quoted price for our common stock on the OTCQB may not necessarily be a reliable indicator of its fair market value. Further, if we cease to be quoted, holders would find it more difficult to dispose of our common stock or to obtain accurate quotations as to the market value of our common stock and as a result, the market value of our common stock likely would decline.
- Share Price & Shareholder Rights - Risk 3Our common stock is quoted on the Pink Sheets OTCQB market which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the Pink Sheets OTCQB market, which is a significantly more limited trading market than the New York Stock Exchange or The NASDAQ Stock Market. The quotation of the Company's shares on the OTCQB may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. When fewer shares of a security are being traded on the OTCQB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one's orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one's order entry.
- Share Price & Shareholder Rights - Risk 4Our share price will fluctuate.
The market price and trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report and other matters, including the following: - operating results which vary from the expectations of securities analysts and investors;- investor interest in our property portfolio;- the reputation and performance of REITs;- the attractiveness of REITs as compared to other investment vehicles;- the results of our financial condition and operations;- the perception of our growth and earnings potential;- dividend payment rates;- increases in market interest rates, which may lead purchasers of our common shares to demand a higher yield; and - changes in financial markets and national economic and general market conditions.
- Share Price & Shareholder Rights - Risk 5Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders and limits our ability to make investments using our common stock.
For us to maintain our qualification as a REIT, we must have 100 or more shareholders during the year and not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term "individuals" includes a number of specified entities. To minimize the possibility of us failing to qualify as a REIT under this test, our articles of incorporation include restrictions on transfers of our shares and ownership limits. The ownership limits, as well as our ability to issue other classes of equity securities, may delay, defer, or prevent a change in control. These provisions may also deter tender offers for our common shares which may be attractive to you or limit your opportunity to receive a premium for your shares which might otherwise exist if a third party were attempting to effect a change in control transaction. Our Certificate of Incorporation limits ownership of our common stock by a single holder or group of related holders to 9.2%. Until we can increase the market price of our stock and increase our asset base, the number of shares that can be issued to any single holder or group of related holders adversely affects our ability to use our common stock as the purchase price for new assets.
- Share Price & Shareholder Rights - Risk 6Our stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks of an investment in us.
Our board's broad discretion in setting policies and our stockholders' inability to exert control over those policies increases the uncertainty and risks of an investment in us.
- Share Price & Shareholder Rights - Risk 7Our organization documents permit our board of directors to issue stock or securities convertible or exchangeable into equity securities, with terms that maybe subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may issue, classify and establish the preferences, conversion or other rights, voting powers, restrictions, and limitations as to distributions, qualifications and terms or conditions of redemption of any of our preferred stock. Our board of directors could authorize the issuance of preferred stock or securities convertible or exchangeable into equity securities, with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock and convertible or exchangeable securities could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.
- Share Price & Shareholder Rights - Risk 8A stockholder's interest in us may be diluted if we issue additional stock.
Our common stockholders do not have preemptive rights to any stock we issue in the future. Therefore, in the event that we (1) sell stock in the future, (2) sell securities that are convertible into stock, (3) issue stock in a private offering, (4) issue stock upon the exercise of options granted to our directors, executives, employees or others, or (5) issue stock to sellers of assets acquired by us in connection with an exchange of limited partnership interests in our operating partnership, holders of our common stock will experience dilution of their percentage ownership in us. Depending on the terms of such transactions, most notably the price per share, which may be less than the price paid per share in our public or private offerings, and the value of our properties, holders of our common stock might also experience a dilution in the book value per share of their stock.
- Share Price & Shareholder Rights - Risk 9We may change our targeted investments without stockholder consent.
We have no restrictions in our Certificate of Incorporation or other organization documents with respect to the types of investments we may make. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our common stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments that we have made in the past. A change in our targeted investments or investment guidelines may increase our exposure to real estate market risk, interest rate risk, default risk and concentration risk, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.
- Share Price & Shareholder Rights - Risk 10Potential conflicts of interest between related parties.
We outsource the management of the Mapletree property to Signature Community Management LLC and Signature Community Investment Group LLC, companies owned by our CEO. This is a related party relationship and while monitored by our Board of Directors could be subject to conflicts of interest.
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