rpgizzle (54.18)

6 Comments – Post Your Own

#1) On November 10, 2011 at 1:09 PM, rpgizzle (54.18) wrote:

The stock will drop after, but this case is still interesting.  Wondering if there is money to be made.

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#2) On November 10, 2011 at 1:37 PM, goldminingXpert (99.74) wrote:

You sure you are converting the ADS/share ratio right? Also, why isn't CMM CAPS-ratable? I really really REALLY want to redthumb it.

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#3) On November 10, 2011 at 2:05 PM, Schmacko (97.36) wrote:

According to this press release: http://finance.yahoo.com/news/China-Mass-Media-announces-theflyonthewall-3719596867.html?x=0&.v=1

The ADS is going through a 1 for 10 consolidation before the ex-dividend date.  The new ADS will represent 300 underlying ordinary shares.  The special dividend will be .07667 per ordinary share which would equate to about $23 per new ADS, which would be worth $24.5 at current prices, for a yield of roughly 94%.

Yahoo says the market cap is $62M, which is below the CAPs rateable threshold of $150M.  I don't know whether or not thats the ADS market cap or the true market cap.

I would think the ADS price would plummet after the payout. 

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#4) On November 10, 2011 at 2:05 PM, Schmacko (97.36) wrote:

According to this press release: http://finance.yahoo.com/news/China-Mass-Media-announces-theflyonthewall-3719596867.html?x=0&.v=1

The ADS is going through a 1 for 10 consolidation before the ex-dividend date.  The new ADS will represent 300 underlying ordinary shares.  The special dividend will be .07667 per ordinary share which would equate to about $23 per new ADS, which would be worth $24.5 at current prices, for a yield of roughly 94%.

Yahoo says the market cap is $62M, which is below the CAPs rateable threshold of $150M.  I don't know whether or not thats the ADS market cap or the true market cap.

I would think the ADS price would plummet after the payout. 

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#5) On November 11, 2011 at 11:53 AM, leebahm1 (68.04) wrote:

rpgizz...Have you gotten any response to your Chinese witholding question? I put some money into this mystery when the ADR consolidation was announced. If I got an answer to the tax question, might consider a quick pop in and out.

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#6) On November 12, 2011 at 12:52 PM, TSIF (99.95) wrote:

No way to quick pop in and out and make much money, but at the share price the same as the dividend as it is currently there should be some profits. The share price will drop instantly on the ex-dividend date. On very rare occasions people mis-add the 3 day ex date and you might sell it before it completely drops, but that would be unlikely.

The large dividend should be treated as a return of capital and not taxed from a US perspective. It would not be US taxed even if not a return of capital in a tax free retirement account. It would be a nightmare to keep track of for US taxes as it would look like a paper loss when the price drops, but I don't believe you can count it as a loss since it was return of capital.

The question of Foreign tax varies by country. I get caught with some Canadian nonsense sometimes and once on some French nonsense.  TurboTax did a decent job sorting through some of it and your brokerage house should split it out so it gets run through the tax process.  Overall a complicated mess.

As far as what piece China gets that's the tough one. The problems are varied.  According to some websites China currently takes at 10%, which sounds VERY LOW. France will take 25% off the top, but you get the Foreign Tax Credit in the US if you file the form.China is also on the list as having a tax treaty with the US.  In this case, however, it's not so good to have it in a non-taxed account as you can't get the tax back from the US.

If this is treated as a Capital return by the US then you'd get taxed the 10% by China and NOT get a reimbursement from uncle sam since it wasn't a taxable event.

Confused?? You should be...we're mixing foreign tax code with US tax code.  This is a great example of two wrongs NOT making a right, it makes an even bigger mess if you can believe anything is worse than US tax code!!

I'm not a tax person, but I've had to play through the charts a few times on some stray holdings. It made me wish I hadn't ever bought them!!!  ;)

This may be one reason you might get a bargain playing this type of arbitration because some of the investors who do the math may decide it's not worth the headache unless they comen out furhter ahead. When this puppy was $1 or $1.50 it appears it could have made an excellent arbitrage play for someone who understood that the stock would pop and then drop. They could have made their money on the pop and left  the dividend hassles to someone else!!
Try Pub901 if you need some bedtime reading.

http://www.irs.gov/publications/p901/ar01.html#en_US_publink1000219359

So it likes like the 10% China Tax to me.  No US tax if it's a capital dispursement, but that might be open to interpretation. No US Refund on the China Tax if it's a Capital Dispursement.

No support from me on any tax question. I'm tossing out some thoughts, anyone who disagrees with me is probably right, or at a minimum supports my theory that you may not want to mess there.  

Easier question:  It is unrateable on CAPS because of the volume rules, not the market cap. It needs to average $50,000 per day in trades.  The 2,000 or so daily volume  times $ per share (until the spike up to $2) doesn't meet the volume threshhold.

The 10 for 1 reverse split making 300 shares to one ADR share will absolutely kill liquidity. It will be harder to unload it after the dividend payout drop.

TSIF

 

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