I dont blame the guys who have never participated in rights to be confused, heck I had an institutional investor tell me today that guys who bt the stock after the 15th at these prices got hosed.. all one had to do was to contact NASDAQ and they would have indicated that the stock was trading "with due bills" (yet another concept foreign to most people...).
The record date in this kind of circumstance is meaningless to the investor but very meaningful to the company, for two reasons. 1, the record date serves to establish that only the shares outstanding as of that date will participate in the distribution, which bars convertible securities (for companies that have them) from being converted simply to secure the distribution. 2, shareholders of record on the record date is who the company distributes the distribution to. However, that's not necessarily who gets to keep the distribution. In cases like this, when the ex-date is after the record date, all shareholders of record on the 15th who sell their shares before the ex-date of the 23rd are obligated to forward the distribution to whoever they sold the BIOF shares to. That part of the distribution process is handled by the brokerages, not the company, so the company's involvement in the distribution ends when, on the distribution date, they pay the shareholders of record as of the 15th.
The brokerages handle the forwarding of the distribution via the use of due bills attached to all shares of BIOF sold beginning Sept 11 and lasting through the end of trading on the 22nd.
If you haven't seen this kind of situation before, it can sound goofy and be confusing, but it's standard procedure. Happens all the time under certain circumstances.
"If the stock trades "ex rights" why hasn't it dropped to fair value yet?"
Because it doesn't trade ex-rights until Sept 23rd.
"People who bought shares of BIOF on 9/10/2014, the ex-right date, and sold them the next day basically got the rights for nothing. Am I missing something here?"
Yes, you are. The ex-rights date was not Sept 10, it will be Sept 23. The rights declaration announcement outright tells you that: "Assuming that trading of rights begins on September 22, 2014, the ex-dividend date will be September 23, 2014."
The rights have to be trading before the ex-date, otherwise there would be no established value by which to reduce the price of BIOF on the ex-date. Standard procedure.
I could not understand the price action either. People who bought shares of BIOF on 9/10/2014, the ex-right date, and sold them the next day basically got the rights for nothing. Am I missing something here?
"The Common Stock is traded on The NASDAQ Capital Market (“NASDAQ”) under the symbol “BIOF”. The Rights will be evidenced by Rights certificates (the “Rights Certificates”), which the Company plans to distribute as soon as practicable after the Record Date and which will be transferable."
"As soon as practicable"----makes sense to me, but hey, I'm not a fear mongering short
Are all the poor investors going to receive non-tradable stock rights? Is BIOF management having problems with the SEC. It seems the Sept 15 date has gone and past. Is BIOF issuing non tradable rights, and if so, when will the rights be tradable? Management is doing a very poor job of informing BIOF investors. I am beginning to become fearful there is a problem with the registration statement that management is have problems curing.
what does KIOR or PEIX have to do with BIOF? Keep you stock pumping off this board.
Here is the code, check it out and think about it ? anybody? http://www.law.cornell.edu/uscode/text/26/269
The only reason for merging JBGL into BIOF is to utilize the NOL sitting in BIOF. The Internal Revenue Code ("I. R. C.") addresses the issue specifically and allows the IRS to disallow the NOL if the principal reason for the merger is to avoid tax. Here is exactly what the I.R.C says.
3. I.R.C. § 269 Disallowance.
In addition to the limitations discussed above, the IRS may disallow the use of an NOL carryover if the IRS finds that control of the loss corporation was acquired for the “principal purpose of avoiding or evading federal income tax.” I.R.C. § 269(a). The regulations provide that, absent evidence to the contrary, any acquisition of a loss corporation that serves to reduce the acquiring corporation’s tax liability will be indicative of a principal purpose to evade or avoid tax. Treas. Reg. § 1.269-3(b)(1) Accordingly, if the acquiring corporation cannot provide evidence of a primary purpose unrelated to tax avoidance, the IRS may disallow the use of all of the loss corporation’s NOLs. Because the standard under I.R.C. § 269 is subjective, there will likely be uncertainty whenever a profitable corporation succeeds to or otherwise makes use of a loss corporation’s NOLs.
I have read the prospectus and can see no reason for merging JBGL into BIOF other than the purpose of reducing income tax of JBGL and utilizing the NOL sitting in BIOF. This would help BIOF shareholders recoup some of their losses and allow JBGL to reduce its income tax burden. There is no other reason for the merger.
If the investors in JBGL wanted to realize their investment in JBGL they could have easily had an IPO of JBJL and avoided the complex structure they created by merging JBGL into BIOF.
My guess is the SEC is going to catch onto this and delay the effectiveness of the S-1 until management clearly spells out this risk. When management clearly spells out the risk, it will alert the IRS, and when the first tax return is filed, the NOL will be disallowed.
Sentiment: Strong Sell