Sound too good to be true?

[Guest kawikaho]

I'm assuming the market will correct the stock price for this extraordinary dividend payment:

 

http://finance.yahoo.com/news/iPass-declares-20-mln-apf-352495178.html?x=0&.v=1

 

This 20 million payment is good for shareholders of the stock as of Aug 31st.  Hmmm... at today's price of 94 million market cap, that's nearly a 21% gain from dividends alone.  Has anyone seen something like this before?  I've seen this once a long time ago, but I wasn't a shareholder in the period this payment was met, and I didn't track the stock price to see if the market adjusted for this distribution.  I'm inclined to believe it will.  At the time of announcement from the board of directors, the price was 1.80.  It's now trading at 1.50.  It will need to go to $1.45 for the distribution to be fairly valued into the stock price. IPass has over 70 million in cash and cash equivalents, and is trading near book.  Any thoughts?  

[Guest kawikaho]

nevermind, on further analysis, the company is a bit fairly valued at current prices (actually, a little over), and the distribution would only really benefit those that are owners below 1.16 since the distribution would reduce cash and the company's book value by that amount.  No incentive for new owners to buy at above 1.16 since they would be paying more for less.

[omagh]

k,

 

A return of capital to shareholders (an extraordinary dividend) is pretty uncommon, but I did have a stock do that a few years ago.  Essentially, the company was generating 20% RoIC, but since revenues were not expanding, RoIC was declining as capital accumulated.  So, management which owned a substantial amount of shares determined that the best use of capital was to return money to shareholders via a special dividend.  The stock dropped by approximately the same amount.  Strangely, there was a run-up in price between the announcement and the dividend cutoff date, but some new shareholders may have been angling to arrange their income by taxation.

 

-O

 

I'm assuming the market will correct the stock price for this extraordinary dividend payment:

 

http://finance.yahoo.com/news/iPass-declares-20-mln-apf-352495178.html?x=0&.v=1

 

This 20 million payment is good for shareholders of the stock as of Aug 31st.  Hmmm... at today's price of 94 million market cap, that's nearly a 21% gain from dividends alone.  Has anyone seen something like this before?  I've seen this once a long time ago, but I wasn't a shareholder in the period this payment was met, and I didn't track the stock price to see if the market adjusted for this distribution.  I'm inclined to believe it will.  At the time of announcement from the board of directors, the price was 1.80.  It's now trading at 1.50.  It will need to go to $1.45 for the distribution to be fairly valued into the stock price. IPass has over 70 million in cash and cash equivalents, and is trading near book.  Any thoughts?  

[Guest kawikaho]

The stock price on this one is trending down after the announcement (dividend cutoff date is Monday next week), and that makes sense to me now that I've done more DD on it: the P/B of this company is $1.45, and the stock is trading just above shareholder equity.  With the distribution, the company will be fairly valued at 1.16, and if any new shareholders who buy after Aug 31st at 1.45 will be paying a 30% premium to book.  Although, it WAS trading at 30% premium to book before the announcement was made, so, I don't know how valid my argument for 1.16/share is.  Although, I don't know why anyone would pay a 30% premium for a company that has little or no growth prospects.

 

This one is a toss up.  I might take a 5% position in it, just to see what happens.  Ack, nothing is easy in these markets anymore.  I'm out of ideas.