Current Price –$1.4
Expected Price - $0.35 (if today is the ex-dividend day)
Upside – 70%
Expiration Date - May 26th, 2017
This is a quick message, as this is a timely situation and I did not have time to do a full write-up. Shares at current prices are either a good short (if today is ex-dividend) or a good long (if today is not ex-dividend), so if anyone manages to figure out which way it is, you stand to make a ton of risk free money.
China Digital TV (STVVY) is paying a large special dividend $1.5/share for the record holders on the 31st of May (as per SEC filling) and the stock is supposed to trade ex-dividend today. By my estimates the stub should trade at $0.35/share (remaining cash on the balance sheet with some discount). Interestingly ex-dividend date is not mentioned in the PR releases by the company itself, but counting T+3 from the record date, today should be the ex-dividend date.
From news coverage on the situation:
"The firm also recently declared a special dividend, which will be paid on Thursday, June 15th. Shareholders of record on Wednesday, May 31st will be issued a dividend of $1.50 per share. This is an increase from China Digital TV Holding Co.’s previous special dividend of $0.50. The ex-dividend date is Friday, May 26th."
However, instead of a sharp share price drop this morning, the shares are declining gradually. So either I am misunderstanding the situation, or the market is wrong. I was not able to reach Investor Relations to clarify on this. Interactive Brokers also did not have today as the ex-dividend day or 31st of May as the record day in their systems (which would seem to suggest that today is not yet ex-dividend date).
There might be ambiguity as the dividend is not yet fully certain. From the press release:
"So far, the Company's offshore account has received a portion of the proceeds in US dollars equivalent to 100 million Renminbi. The remaining proceeds are still in the procedures of currency exchange from Renminbi to US dollars. If the Company is unable to pay the dividend due to the foreign currency conversion, the Company commits to update the market with a new special dividend payment date as soon as possible."
Thus a week ago company had only 15% of the required dividend amount converted to USD. At the same time STVVY still has till 15th of June (pay-out date) to finalize the conversion So it is not clear if the dividend date will be postponed or not. Also not clear whether record date will be changed in case the dividend date is postponed.
Worth noting that STVVY has paid dividends before and current special dividend comes following the sale of the core business. Also insiders recently acquired stock from another shareholder at $1.8/share. So this whole dividend situation is not a scam and I believe it will be paid eventually.
This reminds a bit of BINDQ situation, where the stock continued trading at elevated prices even though shares were worthless (no liquidating distributions) after the cut-off date.
Those considering the long side, keep in mind that $1.5/share distribution might be taxed, especially if all of it is classified as ordinary dividend. Again I was not able to reach IR to clarify on the classification of distribution (dividend vs return of capital)
Thank you Jonathan for bringing this stock to my attention.