Insteresting you should ask. Walk with me on this.
I initially purchased CIMT back in 2007 in the $2.00+ range. I subsequently purchased more below $1.00. I had a target price of $8.00 in 2013 at the time. When CIMT announced their first dividend from the authorized $10 million on 12-27-12 not to be confused with prior dividends, I figured that was it for about 12 months. They had about $14 million in cash as of 9-30-12.
So when the stock hit $8.00 I sold. I got a bit under $8.00 for my shares. Then CIMT suprised the heck out of me with the second announcement in January 2013 of a distribution from the $10 million the day after I sold. At the time I could not figure out where they would get the cash for the second distribution was amounted ot about $4 million. The stock then ran up to $12.00.
Then they announced this secondary offering and in it they mentioned that they had taken out a $5.00 line of credit. They said it was for growth. That was baloney. It was to pay for the second distribution of about $4 million. Note that insiders hold about 65% of the stock. So the dividend distribution was primarily a bonus paid to the insiders. Then they announced the second offering at $5.25
So basically CIMT paid the insiders about $.85? x 9.3 million shares x 65% or about $5 million dollars in cash before they announced the most of the insider holders were being sold in the secondary offering.
I got lucky getting out at just below $8.00. Logically they should never have announced that second distribution when they did but it should have been announced lated in 2013 or early 2014 when they would have had the cash from operations to pay for it. Instead they borrowed $5 million from the bank to pay the insiders the second distribution.