Ann: Dividend/Distribution - BWF, page-2

This has to be one of the most unusual situations I've come across for many years, probably decades:

1.) BWF (trading at about NTA ) owns a 28% stake in WOT

2.) WOT makes up around 50% of BWF's NTA

3.) WOT, itself, is trading at ~50% discount to its own statutory NTA (closer to 60% discount if management adjustments are to be taken at face value).

4.) BWF is paying dividends via an in-specie distribution of the WOT shares it holds.

Needless to say, this sort of novel financial engineering structure (which is a recent arrangement for the BWF-WOT complex, having come into being in only Nov '23 and is something I'll wager very few people have bothered to try to understand) lends itself to potential for the stocks involved to become meaningfully mispriced.

It warrants noting that there would be a non-trivial cohort of BWF shareholders who have until now not been WOT shareholders, probably don't care to own WOT or, simply, want to receive cash, meaning that every time they receive their WOT shares as dividends, they promptly turf them out to replicate a normal cash dividend.

It also warrants noting that both BWF and WOT are illiquid stocks - WOT acutely so - meaning that the minute BWF goes ex-dividend and the in-specie WOT shares get issued, an abnormal level of selling of WOT can be expected.

This arrangement has only been in place for the past financial result, so as a case in point, on 5 April 2024 (the day before BWF went ex-dividend), WOT's share price was $1.17. Two months later it had fallen by almost ~30%, on negligible volumes.

And because, arithmetically, BWF = o.5 x WOT, a drop in WOT drags down BWF, as occurred over that ex-dividend period.

I expect similar non-discerning selling of WOT shares received as BWF dividend after BWF goes ex-dividend (on 20/09).

Which, if I'm right, will be pretty bizarre, because the starting point for any such indiscriminate selling would be a stock that is already at a 50% discount-to-NTA.

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