I agree, and what sucks too, that they announced a stock repurshase too. it seem that MSFT is running out positive NPVs. "END OF GROWTH"
<<It should actually drop more than $3 because not only do you lose the $3 share but you lose the earning's potential of $3 going forward.
I cannot understand why the near term puts do not have more of a premium.
Will the option strike prices be adjusted to account for the special dividend? If it were a 10% stock dividend, I imagine they would.
Like you I will ride out the hit...been long softie since 1996. However, I will daytrade (swingtrade) the special dividend stock price fluctuation. Note, I'd only do this with a healthy strong company like MSFT..as I don't have any qualms about staying long more shares of MSFT if I get stuck in a trade.
Good Luck all.....no matter what, this remains one of the best companies in the world.
<It should actually drop more than $3 because not only do you lose the $3 share but you lose the earning's potential of $3 going forward>
The payout isn't worth $3 to investors - it's worth $3 less taxes. As regards the ongoing loss of income on the $3, that's a concern but was already reflected in MSFT's FY guidance after they announced this plan - so the hit has likely already been taken. Keep in mind that just since the announcement, they've added some $4B [more] to cash.
<I don't believe I am...from and accounting point of view, all dividends are paid out of cash and recorded as dividend expense. This will be no exception. >
No one is arguing differently. The issue is whether or not the cash is from operations or from existing balance sheet cash. In this case, it's existing balance sheet cash.
<The only point you are correct on is that MSFT earnings power on cash investment will decrease after the dividend, but this has no direct coorelation to stock price.>
Actually, I believe I'm correct in all of my statements so far. WRT the earnings power on cash, a hit has already been taken starting in Q4 (when they moved the cash to shorter-term investments) and wrt guidance for the entire year (which they reduced due to the decreased interest rate expectations and the expected payout).