GMR - special dividend

Discussion in 'Stocks' started by 11Blade, Mar 3, 2007.

  1. 11Blade


    GMR has runup from 33 to 45 or so in the midst of announcing a 15$ special dividend payable to holders I think march 9th but goes ex-div on March 26th.

    Is it reasonable to expect GMR to gap down 15+reg dividend on the ex-dividend day.

    After removing 15 dollars of cash from the balance sheet. Is the stock worth more than 30 bux?

    Is this a good way to gain 15$ per share taxable at dividend rate, take the short term capital loss to offset a short term gain and win out taxation wise?

    in other words..

    I have a short term gain of $10k taxable at 30%+ already booked on another stock.

    if I buy X amount of GMR stock to gain
    $10k in special dividend taxed at 15%

    Sell GMR at 10k loss, and negate the $10k short term gain.
    save myself 15% tax???

    opinions and dissection welcome
  2. EricP


    First, yes, you can be certain the stock will gap down roughly $15 per share on the ex-D date. The tax strategy will not work effectively, though, because there is a minimum holding period in order to get the reduced tax rate for a dividend received. I'm not sure if this is 30 days, or some other duration, but I'm 99% certain you cannot buy the day before the ex-D date and sell on the ex-D date and have a tax benefit to go with your essentially breakeven trade.
  3. 11Blade


    What happens if I buy PUT's on this stock?

    Do I pay the 15.00 to the PUT seller for the dividend?

    How is this settled or exactly what are the mechanics of such a trade?

  4. Tax stuff isn't my best area, so I can't help you there. I thought, however, that you should look over this memo from the OCC. Basically, it says that all GMR options are going to be adjusted by $15 on the 26th, so buying puts now probably won't help.

    Hope that helps.