I'm probably going to open a can of worms here, but here goes.
First issue-
On May 18, 1998, 9:26am Midland issues a press release which contains the following statement:
First, there will be a dividend on the publicly traded series A preferred stock (MIDLP). For every two shares of existing preferred series A stock held by shareholders of record on the close of the business day, May 29, 1998, a dividend of one share of preferred will be issued. This dividend will automatically convert to 35 shares of common stock on Oct. 1, 1999, whereas the existing preferred A will automatically convert on Oct. 1, 1998. This 50% stock dividend is being taken from existing treasury so no additional dilution to the existing shares will occur. Management feels this is a fair dividend for the shareholders who have
supported Midland Inc. through its early stages of development.
biz.yahoo.com
For 9 trading days, MIDLP was bought and sold based with the understanding that the company had declared a DIVIDEND and a shareholder RECORD DATE.
Certain SEC rules apply regarding declaring dividends, of particular interest is the application of their T+3 rule. The following is paraphrased from invest-faq.com
If a board declares a dividend, it will announce that the dividend (of a set amount) will be paid to shareholders of record as of the RECORD DATE and will be paid or distributed on the DISTRIBUTION DATE (sometimes called the Payable Date). It's important to note that three-day settlements (T+3) became effective 7 June 1995. In other words, the SEC's T+3 rule states that all stock trades must be settled within 3 business days. In order to be a shareholder of record on the RECORD DATE you must own the shares on that date (when the books close for that day). Since virtually all stock trades by brokers on exchanges are settled in 3 (business) days, you must buy the shares at least 3 days before the RECORD DATE in order to be the shareholder of record on the RECORD DATE.<b/> So the (RECORD DATE - 3 days) is the day that the shareholder of record needs to own the stock to collect the dividend. He can sell it the very next day and still get the dividend. If you bought it at least 3 business days before the RECORD date and still owned it at the end of the RECORD DATE, you get the dividend. (Even if you ask your broker to sell it the day after the (RECORD DATE - 3 days), it will not have settled until after the RECORD DATE so you will own it on the RECORD DATE.) So someone who buys the stock on the (RECORD DATE - 2 days) does not get the dividend. A stock paying a 50c quarterly dividend might well be expected to trade for 50c less on that date, all things being equal. In other words, it trades for its previous price, EXcept for the DIVidend. So the (RECORD DATE - 2 days) is often called the EX-DIV date. In the financial listings, that is indicated by an x.
Next issue-
On May 29, 1998, 9:25pm Midland issues a press release which contains the following statement:
Effective at the close of business on May 29, 1998, the previous announced dividend of the Series ''A'' Preferred will be implemented as a 3:2 split. Signature Stock Transfer will be notifying the DTC of the terms over the weekend. Midland Inc. has notified NASDAQ of the 3:2 terms.
biz.yahoo.com
Well guess what, the RECORD DATE applies to splits as well, but they didn't announce it as a split until after trading hours on the RECORD DATE.
Again I'll paraphrase, invest-faq.com
Often a split is announced long before the effective date of the split, along with the "record date." Shareholders of record on the record date will receive the split shares on the effective date (distribution date).
Further, as of late this afternoon, Signature Stock Transfer had not notified the DTC of the terms because (according to Jason) all he had was a hard to read FAX from Midland, presumably a corporate resolution. In a nutshell, he didn't know the terms other than it being a 3:2 split. That's it.
OK, where am I going with all of this. First, this ain't %$#& brain surgery. IMO, the handling of this entire matter reflects poorly on management. Most of us have more than a few bucks invested here and should demand a public explanation ASAP. Second, I bought all my P's with the record date in mind. Check my posts. I was saying that according to my understanding, as well as my 2 brokers, last Tuesday, 5/26, was the last day to get the P's w/dividend and comply with the SEC's T+3 rule. Needless to say, the P's were selling at - and I was buying at - a significantly higher price last Tuesday than they were since. Please understand the I don't begrudge any of you anything, but if the company and the TA permit 3:2 splits for any shares purchased after last Tuesday (and that's what appears to me to be their intent), I've been ripped and I'm going to raise holy hell. I will demand they repurchase my shares at the prices I payed. Why should I or anybody else pay $30+ for the P's when, based on the company's arbitrary repositioning, allow them to be purchased later at for signifacantly discounted prices. I'll answer my own question - the only reason would be because we assumed that the company understood and was playing by the SEC's rules.
Steve
PS. Otherwise the P's have been trading ex since last Wed. which accounts for the discounted prices. |
