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TMFBlacknGold (99.41)

Inteliquent Special Dividend Caution

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October 05, 2012 – Comments (3) | RELATED TICKERS: IQNT , CTL , EQIX

Inteliquent (NASDAQ: IQNT) just announced a major setback from one of its largest customers. To "offset" the bad news the company simultaneously announced a one-time special dividend of $3 per share. Since the payout exceeds 25% of the share price there are different rules for when the payout can occur.

Can someone explain the following in regards to October 31st? Is that the payout date or the day after the payout date?:

"As per NASDAQ rules, when a dividend is declared in a per share amount that exceeds 25% of a company's stock price, the date on which that company's shares would begin to trade without the dividend, or ex-dividend, is the first business day following the payable date. The company understands from NASDAQ that, because the dividend is expected to exceed 25% of its share price, NASDAQ would apply this rule, and the company expects that the ex-dividend date as set by NASDAQ would be October 31, 2012, the first business day following the payable date for the dividend."

It it my understanding that the following means an investor would have to purchase shares before October 16th to qualify for the one-time special dividend. Right?

"The record date for the special one-time cash dividend is the close of business on October 16, 2012."

I imagine a TON of shares will be sold after the dividend is received, but is there any upside to buying into the dividend? I could see the drop in share price following the payout easily canceling the gains anyone would see from the payout. Your thoughts?

BlacknGold 

 

3 Comments – Post Your Own

#1) On October 05, 2012 at 11:35 AM, TMFBlacknGold (99.41) wrote:

Shareholders' equity as of 6/30/2012 sits at $272 million. The special dividend will be funded with approximately $100 million of cash on hand. Pretty simply one could see that shareholders' equity will fall precipitously to about $172 million before accounting for the company's expected higher costs of doing business. That could peg shares around $5.

In summary, it would probably not payoff to buy into the special dividend anywhere near $8 per share.

 

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#2) On October 05, 2012 at 12:35 PM, dantefool1 (< 20) wrote:

IQNT has been on my watchlist.  It has now gone below my buy target.  My research has shown me several things.   The company has roughly $3/sh cash.  It has little or no long term debt.  Revenues and earnings have been falling the last 2 years.  It has been traded now for 5 years.  The COO and the CFO have stepped down as of Oct1.  They will stay with the company until NOV. 1 (a day after the payout date).  Those people who own shares of the company prior to the record date for the special dividend, but sell shares prior to the pay date, will not get the dividend, according to today's press release.  IQNT press release Sept. 20, has a disclaimer which suggests that there may be substantial indebtedness, and interest expense due to the cash payout.  For these reasons, IQNT is no longer on my buy list.

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#3) On October 05, 2012 at 12:37 PM, EnigmaDude (96.57) wrote:

That is probably why the share price plummeted to just under $8 today.  Did you notice that insiders were dumping shares right up until Sept. 30?  They knew what was coming!

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