"Why would the pps fall by the value of the dividend?"
Because on the ex-date the stock is worth 85 cents less than it was the day before the ex-date. It's really that simple.
"In this case it's a cash flip...new money in which then gets paid right out as a special dividend...which doesn't weaken the balance sheet."
Sure it does. The cash for the new shares sold to Zhen Fa New Energy is already on the balance sheet as an asset of the company. Just like today or any other day, on January 2, the net worth of the stock will a combination of all the non-cash assets plus the cash, minus the liabilities. On January 5, the ex-date, the net worth of the stock is a combination of all the non-cash assets plus the cash, minus the liabilities, but the liabilities now include 85 cents per share that is due the stockholders, so how can increasing the liabilities by 85 cents result in the same net worth? It can't. So why would you expect buyers on the ex-date to pay the same price for the stock as buyers the day before when the previous buyers are getting 85 cents and the ex-date buyers aren't? If everybody else but you was getting 85 cents in cash, would you pay the same price for the stock as they did?
"I have never seen a X-div come after a pay date."
Standard procedure for dividends that represent 25% or more of a stock's trading price. Nothing unusual about it.
"many reasons- some may not want dividend due to tax consequences"
But the record date doesn't determine who gets the dividend, the ex-date does, and the ex-date isn't until Dec 31.
"When will the pps dilution take effect because of the addition of the new shares?"
Apparently there isn't going to be one because it was washed out by the announcement of the big dividend. The new shares were issued last week, so they're already out there.
Yeah, well, I used Yahoo historical price numbers, and Yahoo isn't the last word on accuracy either, so I suppose we have to consider the possibility that both sets of numbers could be wrong!
"the closing price on the day prior to the ex-date was $29.15"
No, it wasn't. It closed at 30.36 the day before the ex-date. For the whole day it never dropped below 30.
"so all things being equal, the opening share price on the ex-date should have been $1.31 lower...., or $27.84"
No, 29.05. It actually opened at 29.14.
"and yet.... the closing price on the ex-date was $29.74"
You finally got one right.
"which is a full $1.90 higher"
No, actually, 29.74 minus 29.05 is 69 cents.
"so here's the question"
Based on wrong numbers, but go ahead.
"is it possible the SPECIAL dividend is not subtracted from the share price on the ex-date?"
No, it's not possible. The market simply bid up the price 69 cents on the ex-date. Prices fluctuate, that's all.
"Legal accounting manipulation is more appropriate to the explanation you have given."
No, it's not. Mutual funds are required to do it by law. There's no manipulation of anything.
"Regardless of how it is presented, the bottom line is the distribution is vapor money."
No, it's quite real. If it weren't, the fund price wouldn't be adjusted down on the ex-date. It's no different than an individual stock that pays a dividend. Stock prices too are adjusted down by the amount of the dividend on the ex-date.
You sound as though this is this your first rodeo.
"A mutual fund dropping over 13% overnight with no transparency or visibility into any behind the scene events was kind of disturbing."
It was completely transparent. Mutual funds pay out capital gains and when they do, the net asset value drops proportionally, and therefor so does the price. That's such common knowledge that I'm surprised that you're surprised.
"what is the sense of giving dividends if the fund price drops with it"
As I previously pointed out, the fund has no choice in the matter. It's a requirement for tax purposes. As for the price dropping, the price of a mutual fund is the net asset value. When a distribution is made, the net asset value is reduce by the amount of the distribution, so the price of the fund has to be lowered to match. It's really that simple.
"The hefty dividend is in my account today, with neither an explanation, nor footnote on how it is pro-rated."
It's not pro-rated. If you owned the fund for one day before the ex-date, you get not only the entire distribution, but the tax liability of the whole thing too. That's why it's usually not a good idea to buy a fund right before the capital gains distribution. This is very fundamental stuff and it's nothing new.
"I still can't figure out why they do it."
Really? It's what mutual funds have to do to. They have no choice in the matter.
"It serves no purpose other than perhaps as a means of capitalizing on any entitled fees on fund management."
No, it actually does serve a legitimate purpose, and it's not to increase management fees. Capital gains can't simply be piled up inside the fund without being taxed, and the only way to apply the tax fairly to all the fund holders is to distribute them and let the fund holders pay the tax at their own tax rates. That's not the fund's fault, it's the tax code.
You're not familiar with the standard repricing of a stock on the ex-date to reflect the fact that the dividend is no longer a part of the stock's net worth? You're not aware that the exchange reduces all outstanding orders without DNR restrictions by the exact amount of the dividend on the ex-date?
The most applicable example for this dividend is the last big dividend RCMT paid out. In 2012 when it went ex by $1, the closing price on the ex-date was $1.04 lower than the day before.
Standard stuff. Nothing unusual about it.
After all, when the stock goes ex this time, it will be worth two dollars less than it was the day before because the dividend is no longer available to buyers. So why would anyone NOT pay about two dollars less on the ex-date?
"you're basically getting a $2/share for free if you buy before end of month."
How can it be free when that $2 will be chopped off the stock price on Dec 31?