Rithm Capital's Preferred Share Analysis and Acquisition Highlight Growth Amidst Persistent Discount to Book

What happened

The DeepValue master report rates Rithm Capital's common stock a BUY, emphasizing its trading at a 0.75-0.76x price-to-book discount and diversified earnings from MSR/credit and fee-based assets. A recent Seeking Alpha article shifts focus to Rithm's preferred shares, recommending Series C for its 9.4% yield when priced below par, while noting Series F as an alternative with potential call risks. This article also mentions Rithm's acquisition of Paramount Group, which expands its commercial real estate platform and aligns with stated growth ambitions. However, the acquisition's portrayal as a growth catalyst warrants skepticism, as integration challenges and competitive pressures could dilute benefits. Overall, the news reinforces Rithm's strategic expansion but highlights distinct investment avenues without fundamentally altering the common stock thesis.

Implication

The preferred share analysis offers income-focused alternatives with attractive yields, but they introduce call and credit risks separate from the common equity's growth narrative. Rithm's acquisition of Paramount Group could bolster fee AUM and platform diversification, yet execution risks and market integration remain uncertain factors. For common stockholders, the BUY thesis holds steady, anchored on the P/B discount and earnings mix, but requires monitoring of BVPS trajectory and funding costs as outlined in the DeepValue report. The news does not materially change the core investment case, emphasizing the need for vigilance against macro shocks and competitive fee compression. Ultimately, while the platform evolves, the common stock offers value if growth materializes, but preferreds serve as a higher-risk, income-oriented complement.

Thesis delta

The new information on preferred shares and the Paramount Group acquisition adds nuance but does not shift the BUY thesis for Rithm's common stock, which remains based on discount to book and diversified earnings. Investors should view the acquisition as a potential catalyst for fee AUM growth, yet remain critical of integration risks and the preferred shares' distinct risk-return profile.