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Saratoga Investment Corp. Message Board

  • mrmonarch2000 mrmonarch2000 Nov 9, 2012 5:48 PM Flag

    Another share-based dividend

    Must confess, I didn't think they could legally do it. Guess it helps explain the deep discount.

    These guys are crooks.

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    • Why do you say they are crooks. This dividend is staying within the circle of current shareholders so there is no dillution. Dillution occurs when shares are sold to new shareholders at a discount. So if every current shareholder opted for 100% stock dividend there would be no change in status and no dillution. The end result would a reduced book vaule by $4.25 a share and each shareholder would own more shares with a lesser book value to get him/her back to square one.In my example I am ignoring the 20% cah portion but we all get that equally based on share ownership. It is up to you if you opt for more cash or wish to join management in getting more shares. Me personlly I am going for all cash if they give it to me and will look to posibably buy more shares if they take a big hit post the $4.25 ex dividend drop.Based on last night close of $18.30 we are looking at a stock ex dividend trading at $14 with a adjusted NAV of $23 ($27.90-$4.25) or a stock trading at 60% of book. If you can take your cash and buy this stock below $14 you will beat managment's price. You were able to get a better price than mangement on last years dividend, if you waited to use your cash to buy more shares. I know this to be a fact because I did this last yearon the ex dividend sell off. It may or may not happen this year but that is the risk I am willing to take.If not I still own a stock trading at 60% of NAV.

      Sentiment: Buy

    • Not sure if they are claiming an exemption from the excise tax or what. Like you I thought the exemption ended after the 2011 tax year.

      Elect cash, though, and I suspect you will get alot more than 20%.

      There is a path for SAR back to "normal" BDC status but it requires having the capital to leverage the SBIC facility aggressively to get the book of businesses large enough to operate efficiently so I for one support the idea of retaining capital to the maximum extent possible.

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