Handling a Dividend Stock that Issues a Discount Purchase Opportunity

Mike Damuth

I have a situation involving one of my dividend stocks that took me a while to sort out the money piece, the shares piece and the dividend piece.

I was offered purchase rights for ticker CLM and was given one purchase right for each share held. The number of rights were rounded up to a number divisible by 3. For every 3 rights held I'm entitled to purchase one share of stock at a discount. I received a one step update that was incorrectly interpreted by Quicken as a stock "sell" reducing my holdings in quicken to zero shares. It seems that Quicken doesn't have a mechanism for dealing with purchase rights. After doing some extensive research to figure this out I deleted this transaction.

I exercised my purchase rights and funded the purchase. I will receive the shares at the end of the month and will receive dividends for the newly acquired discounted shares. I added a new stock manually to hold the new shares until they are received.

Any advice would be helpful,

q_lurker

My comments result from very limited research. Offer corrections as applicable.

It does not appear the rights themselves had marketable value. I don't believe they were tradeable. The issuance of them does not seem to be a direct factor in the valuation of the the CLM shares on or around April 21 when they were issued or announced. Thus, I would not think the rights would be deemed a security themselves. This would not have been like a security spinoff.

You subsequently exercised those rights but that 'deal' will not close until end of this month (?) for a price yet to be determined (determined 5/16?).

Seems to me this is simply a buy of the extra shares for a given price on some (not clearly defined) date. I think I would perhaps insert a Reminder transaction for April 21 indicating 'rights' were issued and then on ___ __ a Reminder that rights were exercised via the purchase on ___ __. I am not seeing any need to add a new security or any other special transactions.

I am assuming those newly acquired shares carry a cost basis and acquisition date wholly defined by the discounted purchase price on date of acquisition (maybe but not necessarily same as date received).