Replies to post #169541 on Spongetech Delivery Systems, Inc. (fka SPNGQ)

[aberber1]

not necessarily, all the shorts would have to buy shares on the open market to give to the people they "borrowed" the shares from. As for the NSS, I'm not sure. I think it would be a good situation for people who are long.

[TigerTrader83]

I think a stock dividend would be great, would really hurt the shorts. Say the float is 200 million and there are 1.2 billion 'air shares' a 1 stock dividend per share would put the float at 400 but would force the NSS to now cover 2.4 billion shares.

Float 200m to cover 1.2 billion
or
Float 400m to cover 2.4 billion

[SDBob09]

Yes, a stock dividend would create dilution. In essence so does a cash dividend. It takes money out of the treasury, makes the company worth less.

Many companies choose stock dividends instead of cash dividends. A stock dividend allows the shareholder to “re-invest” their dividend without paying taxes on such. Or, at their choosing, shareholders could choose to sell their dividend shares, paying taxes, and taking the income.

As far as dilution is concerned, it’s a non-issue. In my example your shares would be worth 20% less and you would own 20% more.

What a stock dividend would do is force those holding NSS to buy stock on the open market to pay this dividend. Shares that may not exist.

Imagine for a moment that the SEC forced you to buy ten apples and deliver them by next Monday. Now imagine for a minute that there were only eight apples on the planet.