[wowo]

First off, let me say that I am relatively new to the stock market.

I think I may have just made an expensive mistake... Last week I purchased 6 shares of GMCR. I was aware that there was an upcoming 3:1 stock split, and today the stock price was adjusted to reflect the split. However, my portfolio is only showing the 6 shares that I originally purchased, with a loss of over $300.00. I was under the impression that I would automatically receive 12 additional shares because a stock split is supposed to be a zero-sum operation.

Then last night I came across this:

The Company will distribute two additional shares of its common stock for every one share of common stock to all shareholders of record at the close of business on Monday, May 10, 2010. The shares will be distributed on Monday, May 17, 2010 by the Company's transfer agent, Continental Stock Transfer, so that the new shares issued will equal three times the pre-split number. The Company's common stock will begin trading on a split-adjusted basis on Tuesday, May 18, 2010 at the Monday, May 17, 2010 closing price divided by three.

Now, does the bolded text above mean that anyone who bought shares of GMCR after May 10 will lose 2/3 of their money if they hold the stock until May 18?

 

[FrugalTrader]

Give it a few more days for your account to reflect the proper changes.

 

[Cal]

It sounds like the people who bought after May 10th, will still have the same amount of shares. If you owned the shares and they were registered through the broker prior to the May 10th date, you would get 2 shares for every one you owned.

Having said that...the price you paid probably reflected the worth of the shares on that given day.

 

[wowo]

That's what I was afraid of. It sounds like the lucky person I bought my shares from is going to get the 12 shares instead of me.

Having said that...the price you paid probably reflected the worth of the shares on that given day.

I don't understand this, can you please elaborate?

 

[humble_pie]

the X date rules would apply. If monday may 10 was record date, then X date was on or about wednesday may 5 (a weekend intervened) (i have not checked X date for this particular stock, but shareholder can ask his broker.)

offhand, it does not sound like poster purchased prior to X date, therefore he would not have been owner of record on may 10, the record date.

 

[wowo]

Ok, I think I've figured this out now (finally!). The record date is apparently meaningless for stock splits. The important date is the ex-date which in the case of GMCR is today, May 18th. For stock splits the ex-date is the day after the distribution date.

Since I bought the shares on May 11th, which is before the ex-date, I am entitled to the additional shares.

I will wait a few days and hopefully will see the additional shares in my account.

References:
http://www.investmenthouse.com/stocksplitrecorddate.htm
http://answers.yahoo.com/question/index?qid=20100512193831AAiBIQw

Thanks for your help everyone.

 

[humble_pie]

alas i don't think so, wo.

to be of record on may 10 and to get that dividend - which was distributed in the form of new shares - an investor had to buy before the X date, which occurred the normal 2 business days before the record date. So purchase would have had to take place on or before wednesday may 5, i do believe.

one consolation is that, whether or not you receive the new shares, you've invested in a steaming company. And sooner or later such a cup always runneth over.

here's what the company announced on april 28:

WATERBURY, Vt.--(BUSINESS WIRE)--Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) today announced that its Board of Directors has approved a three-for-one stock split to be effected in the form of a stock dividend.
The Company will distribute two additional shares of its common stock for every one share of common stock to all shareholders of record at the close of business on Monday, May 10, 2010. The shares will be distributed on Monday, May 17, 2010 by the Company’s transfer agent, Continental Stock Transfer, so that the new shares issued will equal three times the pre-split number. The Company’s common stock will begin trading on a split-adjusted basis on Tuesday, May 18, 2010 at the Monday, May 17, 2010 closing price divided by three.

 

[Cal]

In my previous post I was referring to the probability of the market already taking the current value of the share into account. The markets are basically informationally efficient.

Just as you value the stock to be worth less on the day after the split, perhaps the stock was priced higher the day prior.

 

[wowo]

Just to follow up on this thread, this morning I logged in to my account and the additional 12 shares were there. So it looks like the record date doesn't really matter after all when it comes to stock splits.

 

[humble_pie]

wo you got em !! I'll be !!

i had never heard of anything like this. But broker's reorg says that yes, in a limited number of cases nearly always traded on nasdaq, the X date is set 5 business days AFTER the record date, although the normal & near-universal procedure is to set an X date 2 trading days before a record date. A practice called due bill trading is utilized in these exceptional cases, reorg said.

thank you very much for bringing out this interesting information.