Markets were down moderately on Wednesday as the S&P 500 fell 0.25% and Toronto fell 0.6%.
Shopify was down 5.0%.
The two Brookfield Office Properties Rate Reset Preferred shares on our list got hammered again today.
BPO.PR.G was down 5.2% and BPO.PR.A was down 9.6%.
This would appear to be due to concerns about how credit worthy the issuer of these shares (Brookfield Office Properties) is. There is a lot of negativity around the commercial office segment. Neither BPO nor its parent Brookfield Property partners LP has issued any news. And I have not seen anything regarding a change in their credit ratings although that is certainly something that could occur. DBRS last reported on the credit rating one year ago.
Is the market correct that these shares are at risk of not paying the distribution? That’s a possibility. My understanding of the Brookfield entities is that they are very reliant on the debt and credit markets. I very much doubt that they would allow these shares to go into any kind of default unless they had no other choice. It would presumably be quite a black mark.
These rate reset preferred shares are quite thinly traded. Thin trading can definitely make stocks more volatile.
I am not thinking of selling but I can can’t deny that the lower prices here are a red flag.
In other developments, Costco reported very modest same-store sales growth in March. They were up just 2.6% versus March of 2022 (adjusted for gasoline price changes and currency changes) . In the U.S. the figure was just 0.9% while in Canada it was good at 7.4% (at constant currency and constant gasoline prices). Given inflation this would indicate that volume was down noticeably in the U.S. Costco has now reported several months of slim same-store sales growth. This comes after almost 3 years where sales growth was abnormally high starting with the beginning of the pandemic. Costco shares price fell modestly in after-hours trading.