Stock Market Gurus: Help me understand this

[UncleWai]

Sounds like the company is quitting rather than expanding. I wouldn't touch it with a ten foot pole.

 

[DJFuji]

Well what i'm saying is that assume the shares don't actually drop until the dividend is paid. By the time that happens (dividend pays in january), you'll have long since sold your shares. You'll still qualify for the dividend since you only have to be an owner in DECEMBER. Thus, in theory at least, you'll avoid the huge price drop from the payout but you'll still get the dividend. It can't be that easy. What am i missing?

 

[her209]

Originally posted by: DJFuji
Well what i'm saying is that assume the shares don't actually drop until the dividend is paid. By the time that happens (dividend pays in january), you'll have long since sold your shares. You'll still qualify for the dividend since you only have to be an owner in DECEMBER. Thus, in theory at least, you'll avoid the huge price drop from the payout but you'll still get the dividend. It can't be that easy. What am i missing?

Good luck trying to sell your shares come January 1st when everyone else is trying to do the same.

 

[DJFuji]

Am i being unclear? You're not GOING TO SELL IN JANUARY. YOU'RE GOING TO SELL IN DECEMBER, RIGHT AFTER THE CUTOFF DATE.

 

[UncleWai]

Shit, http://www.investopedia.com/articles/02/110802.asp read please.

 

[her209]

Originally posted by: DJFuji
Am i being unclear? You're not GOING TO SELL IN JANUARY. YOU'RE GOING TO SELL IN DECEMBER, RIGHT AFTER THE CUTOFF DATE.

Which is when everyone else and their mother is going to be trying to dump their shares.

 

[DJFuji]

Ahh. So as long as stock price doesn't drop more than 50% you'll turn a profit (before taxes, anyway). Uncle Wai, that link was really helpful, thanks.

 

[UncleWai]

You still don't get it? By default the price of the stock will drop by the exact amount of the cash dividend on the ex-dividend date.
Whether the price of the stock will rally depends on the outlook of the company after the ex-dividend date. So you expect anyone would invest in a company
which just sold a huge part of its operation and distributed half its market value back to the shareholders?
Don't get suckered in please.

 

[Miramonti]

It could wind up being profitable, depending on where you're able to get in (its trading up to $18.66 now) and out (when everyone else will be dumping as well), but its more like a 50/50 high volatility gamble, no edge in your favor to take the risk.

It still might be an appealing risk to many for tax reasons tho, perhaps collect the dividend but write off $9 in losses after selling?...I have no idea if there would be a benefit there tho.

 

[Modeps]

The overall feeling of the market typically has more weight on how a stock performs than "good" news. I can't count how many times stocks that I own come out with seemingly GREAT news, and their stock sits at the same price or even goes down because that's what is happening today.

Also, unless there's something I dont know, Infospace is doing business in a largely dying medium. They are late to the party for their web stuff and I don't know the last time I even looked at a phonebook or the yellow pages.