Weird trading in Aspen (ASPN)
In their lateast 10Q, dated Nov 16 2009, Aspen Exploration (ASPN) details the one-time dividend they are paying out:
So the stock should be trading ex-div now. Yet watch where it is trading today:
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Once Aspen pays out the dividend, it will have very few assets and would be worth around $0.4 to $0.5 (depends on some assumptions) than to the current $0.89. It doesn't have a functioning business so there is little going concern value.
I would have ruled this out as irrational market behaviour (mistaken newbie purchases, forced selling, etc) but it doesn't appear to be. There is very heavy volume so someone is actually buying on purpose.
So what is happening here?
What is uncertain is whether Aspen is worth a lot more if it manages to buy assets with its remaining cash (roughly $0.5 depending on your assumptions.) Management, one of whom is a major shareholder, has indicated that they are contemplating other scenarios with the remaining cash, including buying other assets in differing, but somewhat related, industries. Instead of Aspen being worth around $3 million, will it be worth $6 million if it buys, say, some prospective land for gold mining?
Another thing I wonder is whether the company can renege on its dividend announcement. Does anyone know if a company can cancel an announced dividend? I suspect they can't but I'm just wondering what is going on here.
Regardless of what happens, cases like this are a good learning experience for me. Newbies like me are investing to learn as much as we are trying to make money. Yes, that sounds crazy but my goal isn't necessarily to seek profits (although I don't want to lose money.) If you are reading this blog, you should keep this in mind (e.g. if you were near retirement, I don't recommend that you follow any investment ideas from this blog.) Ideally, I would have preferred if I was doing this when I was in high school or early 20's, but oh well, can't roll back the clock :(
On November 2, 2009, Aspen declared a cash dividend of $0.73 per share. The dividend will be paid to stockholders of record on November 16, 2009, with the dividend being paid on or about December 2, 2009.
So the stock should be trading ex-div now. Yet watch where it is trading today:
.png)
Once Aspen pays out the dividend, it will have very few assets and would be worth around $0.4 to $0.5 (depends on some assumptions) than to the current $0.89. It doesn't have a functioning business so there is little going concern value.
I would have ruled this out as irrational market behaviour (mistaken newbie purchases, forced selling, etc) but it doesn't appear to be. There is very heavy volume so someone is actually buying on purpose.
So what is happening here?
What is uncertain is whether Aspen is worth a lot more if it manages to buy assets with its remaining cash (roughly $0.5 depending on your assumptions.) Management, one of whom is a major shareholder, has indicated that they are contemplating other scenarios with the remaining cash, including buying other assets in differing, but somewhat related, industries. Instead of Aspen being worth around $3 million, will it be worth $6 million if it buys, say, some prospective land for gold mining?
Another thing I wonder is whether the company can renege on its dividend announcement. Does anyone know if a company can cancel an announced dividend? I suspect they can't but I'm just wondering what is going on here.
Regardless of what happens, cases like this are a good learning experience for me. Newbies like me are investing to learn as much as we are trying to make money. Yes, that sounds crazy but my goal isn't necessarily to seek profits (although I don't want to lose money.) If you are reading this blog, you should keep this in mind (e.g. if you were near retirement, I don't recommend that you follow any investment ideas from this blog.) Ideally, I would have preferred if I was doing this when I was in high school or early 20's, but oh well, can't roll back the clock :(
Some good insights... and don't we all wish we could roll back the clock at times. But a good dividend on a losing stock usually doesn't pay well. Feel free to come by and say hi... at www.investinglikeapro.blogspot.com. Cheers!
ReplyDeleteTypically the ex-date is 2 business days before the date of record (11/16).... Not sure why this is different, but in Bloomberg the ex-date is listed as 12/3/09, payable 12/02/09, record 11/16/09, declared 11/3/09, amount .73.
ReplyDeleteI suspect the data provider (Bloomberg) is getting the payout date and the ex-div date mixed up. The official filings indicate that we are past the ex-div date.
ReplyDeleteIt's really weird. There must be some news that insiders are aware of. It doesn't look like the volume is coming from daytraders and my wild guess is that someone is accumulating.
I wonder if the value of the firm will go up materially if someone else purchases this company or does a reverse-merger (so that they can get listed.) The market cap of the company is tiny (approx $3 million (all marketable/cash securities) remaining after dividend) so if someone pays $2m or $3m more, the current action makes sense. Would someone pay $3 million (in addition to the cash on the books) to take over this company and gain a listing? It's not clear to me. I am not sure how much a listing and anlready incorporated company is worth.
I just called the firm to confirm the details. They said the ex-date of 12/3 is incorrect, 11/17 (yesterday) was the ex-date. Again that doesn't make sense if the record date is 11/16, but the stock looks like a short at this price.. Unfortunately, no one can sell it short here unless you are a registered OTCBB market maker, but if you are long it might be a sale... do some research to confirm but there is a chance if you sell at 90 cents you will collect the 73 cent dividend also. Since the market makers typically rely on their Bloomberg terminal it might be a good opportunity for the little guy.
ReplyDeleteThanks for checking up on this Mike. I appreciate your detective work.
ReplyDeleteI'm not sure if a short (even if it were possible is safe) here. What if someone pays $6 million ($3m more than the $3m remaining cash) just to get listed? That sounds like a lot of money but I'm not sure what the legal, accounting, etc, costs are for getting listed.
I'm not too familiar with dividends and their dating details but I think the company won't know the ex-div date (not just here but in other cases as well.) But it just so happens that the ex-div date is usually a standard 2 days so it is commonly assumed as such and is almost always the case for large companies. Since this is a tiny company, it wouldn't surprise me if investor relations is unsure of the ex-div date. I believe the company only looks up the shareholder of record date and pays based on that. The ex-div date is usually a few days ahead of that but I think that depends on the broker, region, etc. For instance, I'm in Canada, and the settlement (when I purchased it) took 4 days for me, whereas it may be 2 or 3 days in USA (or for stocks listed on major exchanges.) I'm not entirely sure if what I am saying is 100% correct but that's my impression (i.e. company only looks up recordholder date but investor needs to figure out what the ex-div date is act accordingly).
In any case, I'm attempting to sell my stake...will be taking a loss so I better get the dividend *DONT_KNOW* ... interesting case to study...
grr... I sold my shares and it looks like I made a big mistake :( Thanks to a poster at Greenbackd, I just found that the ex-div date can be later than the record date if the amount of the dividend is over 25%. Refer to this post and this document.
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