These are my greatest peeves.

There are many listed companies who pride themselves to paying out high
dividends to reward shareholders. There are also those who consistently pay
special dividends also to reward shareholders. Whichever form the "reward"
takes, the shareholders suffers.

But do shreholders realise that they are worse off after the high dividend? If not
for the transaction cost, it may be better for them to sell just before ex-date and
then buy back on/after ex-date.

The reason is the market wll mark down the stock price by the amount of high or
special dividend. Take this example which is representative of the real case from
my observance from doing historical prices adjustment for special dividend.

Say, a stock is trading at $1.00 and is making a special dividend of $0.20. On
ex-date, for sure, you will see the market mark down to $0.80. So immediately
shareholders suffer a loss in value. They get back an amount of less than $0.20
because dividends are taxable. Tell me, are shareholders being rewarded? Or are
they being penalised?

So this concept of special dividends is a BIG baloney.

Now for Bonus issue, it is still a mystery to me how shareholders are being
rewarded.

Say, a stock is trading at $1.00 and a 1 share for 10 shares bonus issue is
announced. The company would want shareholders to believe that they are
rewarded with $1.00 (the value of a bonus share) but this is just theorictical. If
shareholders were to believe it then they are dreaming.

You can be sure again that the market will mark down the stock price by that
amount of "reward". The market price fo the stock thus become ($1 * 10)/11 =
$0.909. There value thus remains the same. So where is the reward?

So this concept of bonus issue is another BIG baloney.

As far as the shareholder's pocket is concerned, he suffers from special dividends
and status quo for bonus issue. If he buy the story of being rewarded and still
believe so, he ought to have his brain checked.

The company cannot blame the market for the price reaction. It is their stock
price and they should know.

Aiyo,

some companies should give, others should not.

Yes, dividends are taxable. Yes ex-date, the price should go down.

But if Singtel does not want to give me dividend and decide to use the money to build a casino, I will be very scared.

Now why did Mr Oei ask Natsteel to pay a special dividend ? He is no joker, thats for sure.

Then which companies should give and why ? Ah, paiseh I am not qualified to explain. Heh Heh

Mr Oei made an interesting comment in the papers today. He rather pay taxes because paying taxes means he is making money.

How true, don't be distracted by the small things
and concentrate on the bigger picture

It is always so easy for the projection of one's own mind to cause one to read
something that is not there. Is the mind so badly affected by its own projection or
is my posting so badly written that it lost its intended meaning?

For a mind cleared of its own projection, the post is about some corporate action
made by companies that result in shareholders losing some of their profits to the
taxman. Profits which they could have kept for their own pockets if not for the
companies' action. And there is really no bonus in bonus issue. Net the shareholders
suffer.

For example:

"There are many listed companies who pride themselves to paying out high
dividends to reward shareholders. There are also those who consistently pay
special dividends also to reward shareholders. Whichever form the "reward"
takes, the shareholders suffers.

But do shreholders realise that they are worse off after the high dividend? If not
for the transaction cost, it may be better for them to sell just before ex-date and
then buy back on/after ex-date.

The reason is the market wll mark down the stock price by the amount of high or
special dividend. Take this example which is representative of the real case from
my observance from doing historical prices adjustment for special dividend.

Say, a stock is trading at $1.00 and is making a special dividend of $0.20. On
ex-date, for sure, you will see the market mark down to $0.80. So immediately
shareholders suffer a loss in value. They get back an amount of less than $0.20
because dividends are taxable. Tell me, are shareholders being rewarded? Or are
they being penalised?"

For example again:

"Now for Bonus issue, it is still a mystery to me how shareholders are being
rewarded.

Say, a stock is trading at $1.00 and a 1 share for 10 shares bonus issue is
announced. The company would want shareholders to believe that they are
rewarded with $1.00 (the value of a bonus share) but this is just theorictical. If
shareholders were to believe it then they are dreaming.

You can be sure again that the market will mark down the stock price by that
amount of "reward". The market price fo the stock thus become ($1 * 10)/11 =
$0.909. There value thus remains the same. So where is the reward?"

For example yet again:

"As far as the shareholder's pocket is concerned, he suffers from special dividends
and status quo for bonus issue. If he buy the story of being rewarded and still
believe so, he ought to have his brain checked."

Another baloney in corporate action is Rights Issue.

Rights issue can come in differnt variation - rights share, rights warrant or both.
Rights are usually issued at a discount to market price but I have seen cases
where they were not.

I like to use Dayen Environment to explain why I say rights issue is yet another
baloney. On 19 April, Dayen announced a 1 warrant for 2 shares rights issue. The
rights subcription price is $0.02. The warrant exercise price is $0.18. This means
shareholders can effectly pick up one more share at $0.20 for every two shares
they already own.

Today is ex-date. Dayen close at $0.51 yesterday. Based on calculation, each
Dayen share is worth $0.407 upon the rights. This is calculated as such:-
($0.51 + $0.51 + $0.20)/3 = $0.406666.

As usual, and as you can expect, the market adjust the price down. Unfortunately,
in this case the market is trading below $0.407. It is currently trading at $0.37
after opening at $0.36. The general market is weak today so maybe there is some
overshoot on the downside or maybe the market adjust more or maybe both, no
one can be sure exactly.

Now if shareholders did not exercise their rights then they suffer. If they want to
hold on to their shares and not suffer a drop in value then they must fork out
money (for the rights). So when looked at this way, rights are a demand for
money (pay or else you lose). Luckily, shareholders have an option - don't pay
and sell the shares before ex-date. Which brings me to an interesting observation.
It doesn't always happen like this extreme example. See chart below.

The rights issue was announced on 19April. I won't be surprise if prices come all
the way back down. Afterall, the bulge is very artificial.




By the way Analyst's DataServer users can update their Dayen data for the rights issue. The adjusted history is already uploaded.

In the previous example, on Dayen, prices did not come back down. So this time,
with conspiracy theory thinking, I try not to open my mouth too early. So that I
can catch them at their game. And catch them I did.

Take a look at the Transpac Industrial charts below. Thanks to the baloney of
Special Dividend, there are very short term speculative opportunities. I can see
two such opportunities. Remember they are very speculative and not suitable for
everyone. Furthermore, if it happen, mostly in illiquid stocks. And they may not
always happen.

The first is immediately after the annoucement of Special Dividends and "they
push it up" (although sometime this can happen before but you won't know why).
If such an opportunity arise, the ride must end at the latest the day before ex
date. If held onto ex-date and later, tax will automatically be deducted from the
Special Dividend.

The second is on ex-date itself. Should the market misprice the stock and it trades
higher than it should, go short for an intraday trade or at most 2 days.

I have been doing data adjustment for so many years now that I see this pattern
occurred again and again. The same scenario had also occurred with bonus issue.

No one has ever written about this. If you happen to read this anywhere else or
in a book published after today, you know it came from here.

In the third paragraph of the last post, I wrote:

" ...immediately after the annoucement of Special Dividends and "they
push it up" (although sometime this can happen before but you won't know why)."

Note the part in the paragraph. This exactly what happened in Hiap Seng Engg.
Prices suddenly shot up on 11 Sep triggering an SGX query. A day later on 12
Sep, bonus dividend and rights issue announced.

If there were no trading on insider information activities on 11 Sep then what
could this be? Look at the volume on 11 Sep compared to the normal.

Another mispricing on ex-date, another opportunity on ex-date. Human nature will
never change, history will repeat again... on another day, on another stock.

I have just finished adjusting 6 stocks for corporate action ex-date
tomorrow. I can't help not noticing this one.

Yet again, in another slaughther house, in another time (tomorrow),
many will be slaughtered. This cannot be avoided, will be repeated
again on another day, another time.

Tomorrow, this stock goes ex-date for rights issue 4 rights shares for
each 1 share held at the rights issue price of only $0.03 per rights
share. This will value the share tomorrow at $0.098.

Get out your hankerchief and prepare to cry.

No mispricing this morning so no ignorant ones get unneccessary
caught by a vey brief moment of stupidity.

These are the charts before and after historical adjustment. Those
who wanted to preserve their holding value would need to subscribe
for the rights and fork out additional money. For those who do not
or could not they will suffer a straight loss due to the $0.10 now
compared to the $0.30s recently.

Now, why was it pushed up to the $0.30s when only about 2 months
ago, 8,151,000 shares were placed out at $0.12? And a rights issue
of FOUR right shares at $0.03 for ONE share held? - Does not this
reflect badly on the health of the company?




LISTING AND QUOTATION OF 8,151,000 NEW ORDINARY SHARES
OF S$0.12 EACH IN THE CAPITAL OF TOP GLOBAL LIMITED

The Board of Directors of Top Global Limited ("the Company") refers
to the announcements made on 18 January 2007 and 13 February 2007
in relation to the Subscription Agreement ("Agreement") with Messr Hano
Maeloa ("Subscriber") pursuant to which the Subscriber has agreed to
subscribe for, and the Company has agreed to allot and issue to the
Subscriber, an aggregate of 8,151,000 new ordinary shares in the
capital of the Company ("New Shares") at an aggregate consideration
of S$978,120 on the basis of S$0.12 ("Issue Price") per New Share.

The Board of Directors of the Company are pleased to announce that
the 8,151,000 new ordinary shares in the capital of the Company at
S$0.12 per New Share have been allotted and issued pursuant to the
Agreement.

The New Shares were allotted and issued on 1 March 2007 and has
been listed and quoted on the Official List of the Stock Exchange of
Singapore Dealing and Automated Quotation System with effect from
9.00 a.m. on 2 March 2007.


http://info.sgx.com/webcorannc.nsf/560dd4b...72?OpenDocument

Was reading Business Times, R Sivanithy's "Of Warrants and Dividend adjustment".
Am convinced editor are paid by the number of words.

Ok, for discussion.

Relationship between dividends and warrants.

More specifically, look at

SIA
SIA SGA eCW070917
SIA DB eCW070910
SIA BNP eCW070723

Thanks