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Advent Software, Inc. Message Board

  • dhdhoora dhdhoora Jun 17, 2013 10:31 PM Flag

    Why no interest in the Dividend?

    All:

    Advent's 'recapitalization' has hardly taken the market by storm. The question is why would not the announcement of a 27% dividend cause a significant appreciation in the PPS? Shares were approx $32.50 when the special $9 dividend was announced, and now 3 daze later, shares are struggling to get to $34 in a strong market? Obviously, long term shareholders must see this as a positive -- they will get $9 share -- not few buyers are jumping on board to harvest the dividend. Could it be that the $435MM in new debt and the expected wipe-out of current quarter earnings to set up and finance the deal is too much to digest for prospective share purchasers?

    Appreciate sensible comments. I am new to ADVS, and see this as a solid, but pricey, play.

    All the very best,
    Don

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    • Patience...word is finally getting around. It's a no-brainer.

    • "The question is why would not the announcement of a 27% dividend cause a significant appreciation in the PPS?"

      Because the announcement doesn't create value. If a company has a certain amount of cash, that's a part of the value of the company. Giving away that cash to shareholders doesn't make the company worth more, it simply splits the value of the company into two parts: the cash in the investors' hands and the rest of the company still represented by the shares of stock.

      When a dividend is not all from the cash on hand, and is partially (and can sometimes be totally) borrowed money, the remaining stock has the burden of debt service. So where's the created value? There isn't any. Yes, many stocks run up on the news of a special dividend, but it's always an irrational move because no value is created by the mere declaration that a company is going to reduce its net asset value by the exact amount of cash it will be paying out to shareholders.

      So, even setting aside the debt factor, it comes down to one question: Why would the simple act of reducing the net asset value of the company by $9 per share make the shares worth more than the current share price?

      It doesn't.

    • electrowing@rocketmail.com electrowing Jun 18, 2013 8:28 AM Flag

      Well, in the first place, the market was actually very weak Thurs & Fri (retrofit analysts attributed it to FED and Japan uncertainty) ~ didn't really bounce till Monday, June 16. My guess is the market is overbought and will remain weak for some time. I expect ADVS to continue rising as we approach ex-dividend date. Problem is i am not sure what that date is, and will address this concern in my next posting.

 
ADVS
41.85-0.65(-1.53%)Jan 30 3:59 PMEST

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