We’ve gotten similar “liberty check” pitches from Stephen Mauzy and Ian Wyatt in the past, but they always sound so very compelling and bring a lot of questions our way… so we’re looking at another ad today.
I’m going off of a promo for a special “webinar” that they were hosting today, and I didn’t listen to the webinar (life is too short), but I would assume that they were using the presentation to hint further at this “liberty check” and sell subscriptions to Mauzy’s Dividend Confidential… that’s what similar past presentations have led to.
This one says that we can earn a “$4.25 Liberty Check” on each “Liberty Voucher” if we buy now… here’s a bit of the spiel from the email I received this morning:
“The winter solstice holidays fade farther in the rear window. The bills associated with the holiday festivities fast approach.
“Would a ‘liberty check’ help relieve the impending financial burden?
“I bet it would.
“The good news is that we have a high-yield liberty check on immediate offer. Many investors have already claimed their check. Some will claim a check of $2,307, enough to settle all holiday accounts… and leave enough to fund additional festivities.”
Sounds kinda like “free money,” right? If you can use it to pay bills that you otherwise wouldn’t be able to pay, wouldn’t that mean that it’s some sort of magical windfall?
Not quite… these ads are always pitching special dividends, which do indeed roll out from time to time… but they are just a way of moving money from one pocket to another. You buy shares of a company before a special dividend is paid, they pay you the special dividend (on which you might owe taxes, depending on how it’s classified by the company), and then your shares drop in value by the amount of the special dividend.
The beauty of these situations is when you get a company that really does have “addition by subtraction,” or where the business is going well enough that people don’t care about the business they sold or the cash they’re spinning out to shareholders, and it doesn’t impact investors’ view of the value of the company… in those cases, sometimes the share value will climb back up over time and allow you to have a real return on your investment, not just the sugar rush of having some of your investment returned by getting a check in the mail. That doesn’t happen every time, but it can happen.
So what’s the situation this time? More from Stephen Mauzy’s email:
“… ‘liberty vouchers’ of a small aerospace company. The company recently declared a S4.25 liberty check on each liberty voucher. The checks generated a yield in excessive of 23%.
“The aerospace company issuing these liberty checks is headquartered in Melville, New York. It has a long operating history. The company was founded in 1954. Its liberty vouchers have been publicly traded since 1987.
“The liberty checks paid by the aerospace company are worth collecting; its liberty vouchers are worth owning.”
You can mentally translate as we go along — “Liberty Checks” are just “special dividends” … and “Liberty Vouchers” are “shares”.
But anyway, why does this company have a bunch of cash to send out to shareholders? More from the ad:
“The company develops and manufactures hot-melt advanced composite materials.
“The company has further narrowed its focus to increase margins and profits. It has purposely shrunk itself by selling less efficient businesses.
“The most recent downsizing occurred in early December. The company completed the sale of its electronics business. It received $145 million in compensation.
“A portion of the proceeds from the sale of the electronics business will fund the liberty check. The remainder will be invested in the existing business.”
OK, so this is an argument that we’re getting “less is more” — the company is getting better by focusing on profitable and growing operations, and after selling off a less profitable division it’s rewarding shareholders with a special cash dividend… which presumably means that they have a good balance sheet (thought not always — sometimes companies borrow money to pay out big special dividends, which means they’re taking extra risks).
Any specifics about the company?
"reveal" emails? If not,
just click here...
“The company reported $12.85 million in revenue from continuing operations in the third quarter ended Nov. 25. Revenue was up 26% year over year.
“Net earnings from continuing operations posted at $2.08 million for the quarter compared to $344,000 for the year-ago quarter. That’s a whopping 500% increase.”
And apparently this is a family business to some degree, which can often be a good thing — the founder’s son owns a lot of shares, and sometimes big insider ownership is a major motivation for special dividends, particularly when insiders want to maintain control and don’t want to sell shares, but do want to pull out some cash.
So we’re told that “Investors can claim liberty checks of $2,307-or-more with only a modest investment.” What’s the stock, and what does that mean?