Polo Resources Special dividend £3?

[SanMiguel]

Just got a note saying:
IG understands that Polo Resources are paying a Special Dividend of GBp 3 (Gross) with an ex-dividend date of 18th August 2010. Please note that, unlike guaranteed stops, non-guaranteed stops are not amended automatically when a dividend is paid. If your position has a non-guaranteed stop loss order attached, please ensure that you have taken into account the potential fall in price when the stock trades ex-dividend.

As the share price is only at 6.4p, how can that be possible?

 

[scose-no-doubt]

it says potential fall.

 

[SanMiguel]

it says potential fall.

£3 per share though?!
If the share price is at 6.4p, what share price would it go to when the dividend is taken out?
Presumably, they use the shares issued value and multiply it by £3?


Edit, it's 3p per share but ex dividend tomorrow, so would have to hold the shares until tomorrow to get the dividend but then the share price will drop by?

Example:
Stock prices are based on the value of the firm divided by the number of shares outstanding. If the number of shares outstanding increases, the stock price will fall. For example, say there is a firm with a market cap of $750 million, and there are 200 million shares outstanding at the stock price of $3.75 ($750/200). If there is a stock dividend declared of 0.2, then the number of shares outstanding will increase by 20% to 240 million. With this new number of shares outstanding, and the company's market cap remains the same, but the share price will now decrease to $3.13 ($750/240). Conversely, the same results would occur if the firm decided to split the stock 6:5, which means that for every 5 shares currently owned, the shareholders will receive a total of 6 stocks after the split. The number of shares outstanding would increase to 240 million (200 x 1.2), and the market price would be diluted to $3.13.

So, for polo:
market cap: 149.72
shares issued: 2422,68
Shares issued reduces by 3p, 0.03 = 3% = 2350 shares issued.

Should only go down to about 6p in the stock price?
+ sometimes people pick the shares up before a dividend and then sell them so may remain the same or better?

 

[scose-no-doubt]

Stock prices aren't just based on dividend:shares in the real world. Obv it's important but it's just not that black and white I'm afraid. Maybe the ex div has already been priced in through trading

 

[SanMiguel]

Stock prices aren't just based on dividend:shares in the real world. Obv it's important but it's just not that black and white I'm afraid. Maybe the ex div has already been priced in through trading

True.
I was just trying to work out what the share price would adjust to all other things being equal.
If the ex div ids tomorrow, the actual share price wouldn't be reduced until the payment date?
Only thing that could affect it tomorrow is the underlying share price movements say people sell out because the ex div date has been reached.

 

[shortsell]

scary.

3p is coming out of the share price in the form of a cash dividend.

blind leading the blind around here...

 

[scose-no-doubt]

what re you talking about shortsell?

 

[shortsell]

a 6.25p stock is due to pay a 3p cash dividend, the OP suggests the ex-div price should be 6p, and your response is "maybe the ex-div price has already been priced in through trading".

neither of you know what you're talking about, and yet the OP has put money at risk by having a position open, and you are giving him feedback!

GREAT STUFF.

 

[scose-no-doubt]

Its due to pay a £3 dividend not 3p

I didn't give him any feedback. I said that in reality the price may vary from the textbook ex div price.

 

[Jaydee]

Theoretically, POL should open around 3.25p tomorrow as 3p cash per share is being taken from the company.

 

[SanMiguel]

scary.

3p is coming out of the share price in the form of a cash dividend.

blind leading the blind around here...

Confusion was caused by the fact that IG wrote GBp, I didn;t see the small p as normally I've only ever seen the annotation as GBP.

Anyway, so we have to take the shares outstanding, increase them by 3% (£0.03) and work out the expected share value from that.

 

[shortsell]

Scose you don't know what you're talking about, and believe me when i tell you that polo resources, POL.L (last print on sets 6.28p) are not about to pay out a 300p per share dividend.

embarassing.

 

[SanMiguel]

Theoretically, POL should open around 3.25p tomorrow as 3p cash per share is being taken from the company.

3p per share doesn't equal a 3p movement in the stock price, you have to take the issued shares into account?

 

[shortsell]

SM ignore scose and see Jay's post.

all else remaining equal, the shares will trade 3p lower when they go ex.

 

[scose-no-doubt]

If you know the dividend was 3p instead of £3 like the guy said why didn't you just tell us instead of acting like a tw@ and doing your little peacock dance ala flame?
Do you think anyone cares if you know more?

 

[Jaydee]

3p per share doesn't equal a 3p movement in the stock price, you have to take the issued shares into account.

It does because it is 3p per issued share.

 

[shortsell]

the very fact that a stock is trading at 6ish p and the guy is asking about a £3 div and you don't bat an eyelid says it all.

by the time i mention the div size he has already corrected it but you are still arguing the toss at that stage.

anyway, both jay and i have answered his question, and you have proven yourself to be a moron. again. so everyone wins.

 

[SanMiguel]

It does because it is 3p per issued share.

Presumably, I can just hold onto the shares anyway as I will get the divi payout, I just have to adjust stops to take account of that.
So, if my stop was at 5 (bought at 6p) and the divi is around 50%.
Then I need to move my stop loss to around 2.7p for the equivalent value?
5p SL bought at 6p = 17% SL
3.25p * -17% = 2.7p?

 

[shortsell]

Presumably, I can just hold onto the shares anyway as I will get the divi payout, I just have to adjust stops to take account of that.

correct, although through an SB you will probably receive the net divi, but suffer the fall in price to the full gross (3p).

 

[scose-no-doubt]

Sorry Sanmiguel. Shortsell is right I was talking 5hit. I'm fasting. I was thinking of a rights issue.