Spirit Realty Saw Sizable Block Trade Activity

Spirit Realty Capital, Inc (NEW) SRC shares plummeted 24.7 percent last Thursday after the company reported a disappointing first quarter and UBS analyst Frank Lee downgraded it from Buy to Neutral. However, some investors with deep pockets took advantage of the dip and bought large blocks of shares on Friday, pushing the stock back up by 11.9 percent.

According to Lee, the REIT continues to face a challenging retail environment.

“SRC has taken positive steps in reducing leverage and we think the risk of a dividend cut is unlikely at this time, however concerns over future potential credit losses and a lack of earnings visibility will weigh on the shares, in our view,” Lee explained.

Lee noted particular weakness in tenants such as movie theaters and casual dining restaurants, as well as bankruptcies from Gander Mountain and HHGregg.

At the same time, Spirit experienced some huge block buying on the dip on Friday morning after the 24 percent Thursday drop. According to Benzinga Pro, there were six trades of at least 450,000 shares on Friday morning starting at $6.90 and continuing all the way up to $7.14. The two largest trades, a 3.5 million-share trade and a 1.5 million-share trade, were executed at $7.00 and $7.14/share, respectively.

With the company’s 9.5 percent dividend yield seemingly secure for the time being, is seems as though some large buyers saw the huge Thursday selloff as overkill. Despite the downgrade, UBS cut its price target for Spirit to only $9.00, suggesting significant upside from Thursday’s lows. Spirit is now down 31.4 percent in 2017.