LYG ADR Drops 30%, Questions of Dividend Floating in Air

Today the LYG ADR representing Lloyds Banking Group dropped in price almost 30%. The reason I was baffled after this happened was that Google Finance represented this as a .86% fall while the charts clearly indicated otherwise. Note the $1.43 divided flag on the chart.

My biggest question in this matter is ‘to which investors will these dividends be paid and of which holding period etc.’

Apparently, dividends are supposed to be paid to holders prior to November 11, yet according to my online broker (Charles Schwab) these dividends were not paid although I have held the stock for that long. This predicament leaves me quite nervous and angry and the manipulations of the stock by the bank. If I had known they would be up to such behavior I would not have invested a penny in the company.

The bank, who in its subversive and investor-unfriendly manner explained the issue as such:

the joint global co-ordinators have Monday procured subscribers for all of the 1,710,765,987 new shares for which valid acceptances were not received under the rights issue at a price of 55.5 pence per new share, a premium of 18.5 pence to the issue price of 37 pence per new share.

Apparently, they had given investors ‘rights’ earlier on if they would pay for getting more shares or getting rid of their current ones… Those who did not will basically lose either 30% of their money in this stock or 13% (considering the cash dividends for the ADR are taxed at 40%). Either way, it was an underhanded maneuver committed by those do not have a personal stake in the company stock value.

Lesson learned, and still hoping to profit off this one…

The clearest explanation yet for this ‘Rights Issue’ can be found at http://online.wsj.com/article/BT-CO-20091124-703496.html