Well, after one whole year the day has finally arrived. Bad Toys is really finally going to trade x-Southland dividend on February 2nd.
Here’s what this means to shareholders: If you own BTYH at the close of market on Thursday, February 1st, you will receive a dividend of just under one share of Southland for every share of BTYH you own when the market opens on February 2nd. Therefore, let’s say you own 5,000 shares of BTYH on February 1st. You will receive, in the mail, a certificate for about 5,000 shares of Southland Health Services, Inc.
The stock certificate you receive in Southland will be in free trading shares. Here’s what I don’t know- when Southland will open for trading, at what price, and on what exchange.
Then, if you so choose, you have the option of selling your shares of BTYH in the open market anytime after February 2nd. If you choose to do so, you will still receive your dividend in Southland shares.
MarketByte LLC, the publisher of the OTC Journal, currently owns 150,000 shares of BTYH which are restricted, but eligible to be free trading under Rule 144. I will not be selling any of those shares prior to February 2nd because I want the Southland dividend for all of them. However, I might sell some starting February 2nd if BTYH trades at a reasonable level.
I would expect BTYH to open considerably lower on February 2nd. After all, the company is dividending out 75% of its value to shareholders, so in theory when it trades x-dividend it should open 75% lower.
I will publish a comprehensive update early next week so everyone has a couple of days to make up their mind on how they want to proceed.
In short, if you are going to hold your BTYH for the dividend, you are taking the leap of faith that Southland can open and trade at a much higher level on a stand alone basis. On paper, it should be able to happen.
If you are concerned about the loss of value in the BTYH shares, and aren’t willing to be on the future value of Southland on a stand alone basis, sell your shares of BTYH on or before February 1st. It will be worth a lot less on February 2nd.
I don’t know how long it will take for Southland to open and trade on its own. However, I personally believe it will take 2 months at the minimum, and probably longer.
Here’s the current chart:
BTYH has been in much better shape since this never ending regulatory process finally moved in a positive direction with effective registration of Southland and now the NASDAQ finally allowing for the x-dividend date.
However, the stock has not headed to its previously lofty level of $2.50. Over the past year the stock drifted down to $.50 as the company slowly ground through the SEC.
One year later we have some progress, but the stock is now only around $1 despite the $50 million plus in annual revs and consistent quarterly profits.
The market is simply telling the company their spin out story is less believable after the year’s wait. Nevertheless, the story is the same as it was a year ago.
I believe this is one of the most interesting special situations I have ever seen, and it is going to be very exciting to watch it play out. On paper, it all makes sense. If CEO Lunan pulls this off, you will wish you owned a lot more in the $1 range.
As posted today, if the Nasdaq gave Southland an official x-div date, does that mean we can expect Southland to open on the Nasdaq in due time?
Why else would the Nasdaq be required to provide an official x-div date, if Southland wasn’t going to trade on that exchange?
Editor: Much as I would like to read more into your observation, in reality the future listing of Southland and the NASDAQ’s allowing for the x-dividend date have nothing to do with each other. As far as a NASDAQ listing goes- I believe the company qualifies for a NASDAQ listing everyway with one exception- they need a $4 minimum price. So, if someone will open it at $4, they have a shot. There are 8 million reasons it will be tough. Those are the 8 million free trading shares we all own somewhere between $.50 and $2.50. We will see.
Do you anticipate a run-up in stock price before dividend date and if so, what would be a pps prediction? I sold at $1.04 from .72 and now am considering getting back in.
Thanks
Editor: Congratulations- you scalped a nice little trade there. I just don’t know if the stock will run up into the x-dividend date. I’m sure there will be people who want to buy the stock next week for the dividend before it is too late. On the other hand, there will probably be some people who want to take a trading profit and aren’t willing to wait out the uncertainty of if, when, and at what price Southland will trade. My guess would be it will be a little higher. Since I have never seen this before, I can’t draw on any experience even after 20 years of trading in microcaps.
Hi,
What happens if the new stock does not end up trading on a new exchange? If Southland ends up remaing on the OTCBB trading by itself not connected to BTYH…won’t it be a much more valuable company and trade higher just based on that?
Thanks,
Dan
Editor: Eventually Southland will trade on its own on some exchange. They could always go to the BB if they absolutely had to. Just to be clear- BTYH is the surviving entity and will continue to trade. BTYH will own 25% of Southland shares- that’s where its value will be. However, BTYH can never go back to what it was. Those dividend shares will be sent to you, and BTYH can’t “take them back”. Until Southland opens for trading, it will file just like a public company, but from a shareholders perspective it will be a private company. That is really your risk. Where will it open, when, and for how much?
I’m trying to come up with reasons as to why they would not be able to meet the $4 NASDAQ requirement, but I’ve never seen this kind of action before. Presumably, Lunan thinks this is doable. But where are those people with Southland shares left if he can’t reach the $4 mark? Some proverbial grey area where we can’t move our shares?
Editor: It could always open for trading on the AMEX at $3. It could also open on the BB as a last resort. It could also open at $4 on the NASDAQ SC, trade there for one second, and sell down. Who the heck knows? A lot could happen.
In reading the prospectus, I noticed that the insiders can sell their Southland shares @ .62 after the ex div date. How does this effect things?
Editor: Every share out there was registered in the registration statement. If insiders want to sell, they still have to sell under the same restrictions that normally exist. If they were to sell, they would sell at wherever the market is just like anyone else. The $.62 per share is meaningless.
Curious to know where will people be left with Southland shares if they can’t get an open at $4 as per NASDAQ requirements?
Editor: You will be left as a shareholder in a company that is essentially a private company. However, I don’t see it likely that this stock will never open on any exchange- it will open someday on some exchange. It’s just a question of where, when, and how much. The regulatory process for making that happen is 80% done. Exchanges want companies like this- that’s their business.
I don’t get it why is BTYH trading down? Last year the price was $2.50 and this year the price is less than a dollar, how does this make sense?
Editor: Logically, it doesn’t. Perhaps the market doesn’t find the story as believable since it has taken the company a year to get there.
I was reading the prospectus on Southland and came across the fact that the insiders are free to sell their shares @ .62. Will this effect anything?
Editor: No, they will still be restricted from selling under the standard regulatory requirements.
Editor: yes, step 1 complete.
I noticed an announcement on Yahoo that the ex dividend date was changes from 2/1 [thursday] to 2/2 [friday].
I would guess that if you want the spin off you can’t sell bad toys until monday. That is of course they don’t dhange the ex divident date again.
Editor: You can sell it Friday and still get the dividend.
The last BTYH release states, ” The Company anticipates that it will pay the dividend to the beneficial owners in certificate form.”
What does that mean, “in certificate form.” ?
Will the ex-dividends of Southland shares be electronically received / credited to our existing brokerage accounts or will they be physicaly received in the mail or what ?
Please forgive me if my question sounds ridiculous. That is why I contact you.
Editor: You will not receive your shares electronically. You will receive your shares in the mail in certificate form.
OK. Heres how I assess the risk. Let me know if I am too optimistic. The SEC approved the filing for an ex dividend. They would not have done so if they thought it would not trade anywhere(at least on the BB). So the worse case scenario is that it doesn’t trade on a major exchange but trades on the BB eventually at a much lower valuation than the 3 or 4 dollars required. So lets say you bought the shares at $1.25 and get almost a share of Southland for every BTYH, BTYH will lose about 75% of its value and trade maybe around $0.25 and southland will trade well below the 3 or 4 dollar mark say at $1.00 on the BB. In this case you break even. If you bought higher than $1.25 initially you stand to take a loss but not too much unless you bought all shares at the all time high. The upside is close to a dollar gain on every share if it opens up on a higher exchange. Of course there’s no telling if Southland will trade at 30 cents itself but the above seems to be the worse case. What do you think?
Editor: Pretty good assessment. Here’s the issue- can the CEO figure out a way for Southland to trade at a level it is worth? I compute the value to be at least $2 on the low end, closer to $4 on the high end. So, on paper it all makes sense. One catalytic event that would greatly improve our chances- if the debt were to get refinanced on more reasonable terms and the company came out of default with GE Capital and the IRS. If they can’t, they still make money consistently. This one will just be a question of taking your shot and keeping your fingers crossed.
Thanks for the great work on CPNE. I’m really enjoying the ride. My comment on BTYH, why such low volume? If the dividend is such a great idea and the stock is going x in two days I would think that demand would be high.
Thanks.
Editor: Why would it be high? The story has been out for a while. Everyone knows the risk and opportunity. By now, you should be either in or out. If you are going to take the risk, it doesn’t matter what the stock does now. If you are a seller, you might be disappointed. Today is the last day.
So, I understand that we won’t receive our shares electronically, but in the mail in certificate form… Only, I live in Belgium, Europe! How are they gonna do that? Any ideas?
Editor: They don’t have mail service in Belgium? Why can’t they send a cert to you in Belgium? As long as the brokerage firm that holds your shares has your address, they will get there. If there is a problem, you can always call the company directly.
I have the BTYH shares in my IRA. If I receive the Southland directly in certificate form, will that be a taxable event for me?
Editor: In your IRA it is not a taxable event. I’m pretty sure it is not a taxable event for anyone.
With reference to question 5, you answered:-
Editor: You will not receive your shares electronically. You will receive your shares in the mail in certificate form.
So when Southland will start trading one fine day, will the shares on my certificate be credited to my existing online brokerage account ‘automatically’ by the online company I use for my online trading or do I have to show the certificate and contact my online trading firm myself? (What I mean is, how am I gonna be able to trade them on the ‘D-day’ if they are not in my electronic account?)
Sorry for such a question but I am trying to understand how this gonna show on my electronic account. By the way, much thanks for the ACTC and CPNE tips….I made some good profit on those two.
Editor: After you have received your cert in the mail, you simply send them into your online brokerage firm. The customer service people can tell you where. The cert should not have a restrictive legend. You can send it to them for safekeeping until it opens for trading. Then, they will post the shares to your account.
The deed is done! Now my Bad Toy stock has dropped and I have a loss if I sell it. Once Southland is trading what is my original purchase price? Do I list it as no cost?
Editor: Like I made very clear to everyone- if you held it after Thursday, it was going down. Here’s how I would book it for taxes- you have your cost on BTYH and if you sell you have to gain or loss. If and when you sell the Southland, you have a zero cost basis. Check with your accountant to be sure. I am not a tax professional.
Based on my prior experience with taxes, an allocation of your original cost for BTYH needs to be allocated between the shares of BTYH you now have and the shares of Southland that you will be receiving. The allocation is based on the fair market value of the shares on the date of distribution of the Southland shares. So for instance if the Southland shares are worth 60 cents a share and Bad Toy shares are worth 40 cents a share, your basis in Southland stock is 60% of your cost in the shares BTYH shares prior to the split and the basis in BTYH shares will be 40% of the pre distribution event.
I suggest you verify this with your accountant and/or research it on the irs.gov web site.
Also, the Southland shares that we should be receiving will probably remain in street name with the Brokers.
Editor: Thanks for the contribution on the taxes front. On the shares- you are simply in error. The shares will not be delivered in street name. The will be delivered to the address on your account in cert form. I am certain of this.
With the dividend complete, what are your thoughts on a target price to sell the BTYH shares? My apologies if you have already covered this.
Editor: The way I see it, it really doesn’t matter if you sell the BTYH shares. I think BTYH shares are an interesting situation. Now that the dividend is done, the real value here is the Southland shares. However, suppose something great happens with Southland before it opens for trading? How do you participate?- Well, BTYH still owns 25% of Southland, so as Southland goes so should BTYH. Therefore, if Southland did something great like refinance the debt, you could particpate by buying BTYH. However, in the meantime, as BTYH languishes, I would expect it to just keep creeping down since there will no longer be much interest. Sell it or hold it, what really matters is what happens with Southland.
My Account received southland shares Today! What happens to the fraction shares ?
Editor: I have heard of a few people out there receiving some sort of electronic notification of receipt of shares. It is likely that will be reversed, and the shares will come out. You will then receive a stock certificate in the mail you can send to your brokerage firm. I am told the shares won’t start being mailed for about 2 weeks. The cert probably will not have fractional shares.
Is btyh a dead stock now? I mean in the sense that most of the value was in the southland distribution. Does the company have any real value other than the shares of southland that they still retain? thanks
Editor: That’s a very interesting question, and it’s a two part answer. Part 1- now that the Southland distribution is taking place and the stock is trading x-dividend, the only value in BTYH is the 25% of Southland it owns. Therefore, for the time being the stock is probably dead. On the other hand- suppose Southland pulls off some great stuff like a refi of the debt or announcing it will get a senior listing? If you want to add to your position before Southland opens for trading, the only way to do it would be through buying BTYH shares. Therefore, it could go a number of ways from here.
HIHO!
Please excuse my question, since I am NEW to investing. The talk of mailing certificates make me wonder: How does BTYH have my address? I am investing through an on line broker, and the SOUT shares have appeared on my account already. BTYH probably doesn’t have my address. How does this work?
By the way, I got my butt kicked on the shares of BTYH after the First. Should I hold and pray for a good rebound in the future based on BTYH’s other divisions, or take the BIG LOSS now?
Thanks for an interesting education.
I hope this finds you well!
Michael
Editor: BTYH has your address through your brokerage firm. As a public company, BTYH can get its shareholder list from the firms. If you objected to having your name given to companies, then the firm has to get you your shares. As far as the shares of BTYH- that’s an interesting question. That stock might trade well when good things happen to Southland or they make announcements related to getting Southland up and trading. On the other hand, it might be dead money for a long time. You have the Southland shares, and that’s really your upside. As far as I am concerned, do whatever you want with BTYH.
I believe BTYH was more than just Southland. It was really 2 businesses. One was the Health Services Business (Southland) which earned the bulk of the money. The other was the Motorcycle Business.
The Motor Cycle Business which is still BTYH had a Gross Profit of $40,521 for the quarter ending 09/30 with total Assets of 6.4 Million Dollars. The sales for the quarter were over double the 2 previous quarters combined.
Also, the sales for the Motorcycle Division, I believe doubled.
In summary, BTYH motocycle business should not be written off as worthless.
Editor: I always look at it this way- if the motorcycle business were stand alone, would I buy the stock. The answer is an emphatic no- I would have zero interest. The gross profits might have been $40k, but the cost was probably $200k. In my view, totally worthless as a public company. Nice as someone’s hobby. They probably sold 2 motorcycles.
Yes editor, but as I believe BTYH still owns 25% of Southland which is something of great interest.
Michael
Editor: As I have written, if Southland make progress before it opens for trading, BTYH will be the only way to participate. That’s what makes it interesting.
I still have not recieved or have been notified in any way reguarding my new shares in Southland stock. Should I be concerned and if so who do I contact.
Editor: Not at all- it will all happen in good time.
With assets of $6.4 and showing a profit, the motorcycle division can’t be as bad as what you are making things out to be. Obviously they did SOMETHING besides sell 2 motorcycles…why such a dim view?
Editor: The assets are all shares of Southland. It’s not so much pessimism- I simply have no interest in this motorcycle thing as a public company. It is not worth owning, except for its ownership of Southland. If you want to own this stock because of its motorcycle business, that would be your choice. In my view, the only reason to own it is because of its shares of Southland.
What’s going on with BTYH creeping up to the mid .30′s? I dumped on third of my BTYH because I am still holding a lot of Southland. Also, I still haven’t received any confirmation of my shares of Southland but they have been showing up as “restricted” on my etrade account. Who do I contact about the certificates not arriving?
Editor: Nice to see BTYH creeping up. The higher it goes, the lower your risk on Southland if you sell it. I think it is telling us something. The company will keep everyone informed on the cert delivery process, so don’t worry about it for now.
Delivery of Shares:
I called my Broker to ask about this.
He says that the certifivate when it comes in will be sent to the book keeping department and held there until it is listed for trading. They will not mail it to me, which is a good thing because it is such a long way to their office.
Editor: I don’t believe your broker knows the story here. I believe you will receive your shares at your mailing address on your account, and you will have to send them on. I am not certain, but I believe that will happen.
The news is out. BTYH/Southland Health has a definitive letter of intent to refinance 10MM and pay off GE and IRS.
As discussed previously, this puts Southland at $3-4 as soon as it opens (couple of months) and makes BTYH a conservative $0.90 now.
Please check my math and thought process, but that is how the facts and figures add up.
Editor: Don’t have time to think it through right now, but seems senseable. It certainly improves the odds of a NASDAQ listing considerably.
Just an observation on the Soughtland spin-off.
Like many others this has been and still is a frustraing experience.
It reminds me of a Keystone Cops film.
It seems to me that Lunan and company should have never posted the ex-dividend date in January 2006 until they had their S-1 submitted to the SEC.
It is quite apparent that they did not have any idea what they were doing. It’s been a real comedy of errors.
Even taking into consideration that this is a “special situation”, Lunan and company just did not know what they were doing.
Now we have to sit back and wait for them to get Southland listed. I really wonder if this is ever going to happen. I mean how hard is it to get financing to pay off the debts on Southland. It doesn’t take a rocket scientist to go to a bank to get a loan, or am I being too simplistic?
I wish Lunan and company would get their ducks in order and get going already!
Editor: Thank you for your comment.