Digital Brand Media and Marketing Group Inc (DBMM)

[Krombacher]

DBMM has about 825 million shares outstanding.

Hence, a penny cash dividend would cost them $8.25 million. It has to be a cash dividend.

Based on charts, it seems short sellers want to avoid 2 cents a share and that may be their margin call price.

Hence, if DBMM were to use a dividend strategy they would need about $17 million. But with revenues of only 300k or so, I don't think they'll be able to do it.

Nevertheless, the reason I bring it up and to educate you about it is this:

From chatGPT:

One strategic approach to combat short-selling is the implementation of a dividend policy. When a company issues dividends, short sellers are required to pay the dividend on all shares they have shorted. This requirement creates a significant deterrent, as it imposes a recurring financial obligation on short sellers, making it less attractive for them to maintain their positions.

If a heavily shorted company were to start paying a dividend, short sellers would likely seek to exit their positions to avoid these ongoing payments. This exit strategy would involve purchasing shares, potentially leading to a short squeeze, where the demand for shares drives up the price significantly.

Moreover, a dividend acts as a backstop for shareholders. For instance, if a 10 cent dividend were offered, shareholders would be disinclined to sell their shares for less than ten cents, knowing they could receive the dividend and retain their shares. This behavior would be particularly impactful during the T+3 settlement period. If the share price spikes, shareholders would prefer to hold onto their shares for the dividend, and with no one selling on days T+1 and T+2, brokers would be forced to liquidate short seller positions on T+3, buying shares at any price, thus causing a significant short squeeze.

But I totally get it if this isn't an option due to lack of cash and a desire to grow organically.

But it's a good thought to keep in mind as you think of strategies.

You would have a similar effect in a buy out, because if the acquirer uses its shares to buy DBMM then those shares must be delivered to the Shareholder at the agreed upon conversion ratio. In this case, short sellers would have to go out on the open market to buy the acquirer's shares and deliver them at the conversion ratio to DBMM shareholders in exchange for the DBMM shares. This too would result in a massive short squeeze. It's very effective at destroying shorts.

Krombacher