First of all because they have to provide liquidity. Secondly because they trade it. There will be lots of other let's call them no-knowledge participants like hedge funds, traders etc trading the stock.
When a company distributes a 5c cash dividend, you will see the stock go down 5c on the ex-date. Because the company is worth less 5c per share. That's easy to understand, right? What will happen with SIAF in Q4 is, you will have a lot of buyers beforehand who want that dividend because the stock is so cheap.
Now, the stock dividend. Let me give you another example. HOLL was (is) a dark company on OTC. It actually had a relatively high valuation for a dark company. Much much higher than SIAF for instance. Then they announced a special cash dividend, a return of capital to shareholders, of $0.45 per share. The stock was trading at $0.70. The implied value of the company was something like $1.20. Comparable to SIAF's $13 or book value. But you don't get fully valued as a dark company. So what do you think happened on the ex-date? I was actually trading the stock, hoping it would drop less than $0.45 (I held the stock for 1 day). Because, there have been similar cases where the stock doesn't drop by that much, or even went UP briefly following the ex-date. But, the stock dropped a few cents MORE than $0.45 on the ex-date. So WTF happened here? I think I know what happened here. It was too obvious. The company had already disclosed the exact value of the distribution in a couple of press releases, and then FINRA did it again. The market makers simply beat it down from the open, leaving no profit for me. The fact that you still own a dark company afterwards doesn't help much either of course. But the fact that it was trading at $0.70 beforehand and below $0.25 afterwards still doesn't add up of course when the implied value left is over $0.80. Alas, I made no money on this trade but it was certainly worth a try.
As for SIAF, there are some similarities and some differences. The value will be KNOWN. $43M or close to $1/share. But you will not receive cash. You will receive preferred shares in TRW. Do the no-knowledge market makers and hedge funds even care? No, to them it's a $43M distribution. Officially. Also important, if you are short, then you will likely have to PAY your broker $1/share. So the market makers etc. will beat it down on the ex-date. But what happens if we trade below $1? Interesting, eh... ;-)
Now we get to the time leading up to the ex-date. The next several weeks and months. Below $1 NOBODY will even consider selling because you get $1 distribution + 5c cash + 2nd distribution. Basically free money. And the people who already own the stock want that dividend in general. It's why we are here. This will drive the PPS higher... when you have no sellers. Of course the share price is not going up yet, but that's because people don't know it yet (we need an announcement first) and because Solomon is still dumping stock.
We could trade anywhere between $0.60 and $3 one day before the first ex-date, is what I'm saying. My guess is, a bit higher than $1, close to $1.50. If the distribution and the process goes smoothly as planned.
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