Fighting "the Shorts"

[Palm]

One clarification in this not sure if people are catching.  This CEO is stating to pay a "stock dividend" not a cash dividend to battle shorts.  Note the explanation:
"When a company issues a stock dividend there must be an audit of all issued and outstanding shares to determine who to issue the stock dividend to and how much stock to issue to them."

Pretty clever and almost a mini-stock split.  The article also mentions the cash dividend strategy with VirnteX which we have discussed before and that obviously hits cash and would likely require it taking place after a selldown.  But a stock dividend could take place at any time couldn't it?

[Movieguy]

Good catch, Palm, and good point that you don't need extra money for a stock dividend. IOC should definitely follow this strategy asap, imho.

[Getitrt2]

Everyone should be aware that the article is referring to "stock dividends", meaning dividends "paid" in shares of stock, in varying numbers, which would not require any cash whatsoever.

Oops, sorry, Palm. I didn't go to page 2 and notice your post.

[sageo]

Palm- Sure liked your idea of a "mini stock-split" . Even if IOC offered a one for each 100 shares split, we would still have to get the info on who owned how many shares in order to facilitate the proper split . This would not dilute our ownership percentage (price a little) and would likely flush out some of the"bad guys" . Where am I thinking wrong? TIA for your response.

[sageo]

Maybe we need to issue a $0.01/share dividend monthly to keep the shorts honest. Would not cost too much and would serve the desired purpose of locating the shares and the criminal naked short sellers.

Pet - Hope you caught Palm's idea of a "mini stock-split" ....(instead of a cash dividend) ,even tho' I thought your idea was a good one. Admin was concerned about using our cash for drilling activity , so by going the mini stock-split we could still get the names of all the shareowners and also have a very small dilution. Your thoughts if you have time. TIA

[tarulestheday]

I can't imagine that there would be as much impetus for location of shares for a mini-split compared to a divi where the shorts are required to pay the divi. In a naked short situation, the broker with the fails would have to pay the divi. All of the short shares would be required to pay the divi and that would really shake the short tree.

[Palm]

I agree; the "mini stock split" was a euphemism to describe the stock dividend. The stock dividend ends up having more shares in circulation without the more drastic effect of a true split. To have the desired effect the stock dividend needs to have regularity to it to discourage the naked shorting. Quarterly would probably do it as there is a bit of administration necessary. Then to really nail shorts issue a cash dividend after a sell down as long as there is enough cash. Would t have to be big to have the desired effect.

[sageo]

Palm and TA --Thanks guys for your comments . Good explanations. Have a pleasant evening.

[Palm]

Other things to consider as far as advantages of stock dividends:
1. Generally a stock dividend is not taxable unless it has a cash dividend option attached. A pure stock dividend is not taxable as opposed to a cash dividend which is not deductible by the company but is taxable to the receiver. Double taxation and cash used
2. The overall value of the corp remains in the hands of the same shareholders. The stock price tends to reduce proportionally but the overall value is the same (this is where it's like a mini-split).
3. The receiver of the stock dividend has a choice; he/she can retain the shares tax free, or can sell the dividend shares to pocket cash (less taxes). For this reason some feel that the stock dividend is the best type of dividend.

Is IOC management is reading this thread, whadya say?

[cybersssss]

Sure looks like a win-win to me. There is empirical evidence that this works against naked shorting. Management?