Class Action
Don't confuse this with a class act, i.e. someone who gives up his exit-row seat to a veteran, or offers a stranger his umbrella on a rainy day. Class actions tend to go the other way, if only because they tend to involve corporate lawyers.
Say a company dumps a bunch of chemicals into a nearby river, and those chemicals end up in the groundwater of a particular town. Everybody in the town suffers some of the effects. Rather than each person suing the company separately, which takes a lot of time and money on both sides, they combine their complaint into a single suit. They make a class action. They aren't suing as individuals...each claim gets combined under the same umbrella: a class.
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Finance: What is Payment in Kind/PIK?44 Views
Finance allah shmoop what is payment in kind or a
pick All right so you know what a normal vanilla
dividend is right A company is so profitable it can't
think of anything else to do with its excess cash
so it just gives it back to its shareholders a
really nice gig if you can get it The company's
stock trading a twenty bucks a share pays twenty cents
a quarter in dividends or eighty cents a year and
well that yields four percent Got it that's eighty cents
over twenty bucks Simple vanilla dividend Will companies also often
carry debt The company whatever dot com has fifty million
dollars in debt which cost them six percent a year
or three million dollars a year to pay the interest
to rent that money when times were good the company
pays the interest in cash but dividends and interest payments
aren't necessarily always paid in cash They can be paid
in stock as well And yes this is weird Why
would a company pay a dividend or bond interest in
its own stock that would dilute the equity ownership of
the company So why would they do it Because they
had teo some companies will have offered bonds which give
the company the option of saying that interest either in
stock or in cash and company thinks it is in
jeopardy of potentially going bankrupt Well it will pay its
interest obligations in stock instead and this is generally a
very bad thing for equity holders and the bondholders I'm
so happy about it either because they don't know what
that stockton worth bond people are meeting potatoes kind of
people and they just like cats Thank you very much
So what does that communicate to the shareholders Well it
communicates that the company's management at least thinks it's equity
is overvalued so the company is choosing to dilute equity
holders by using its equity or stock as a currency
instead of cash and even worse the company might be
communicating well that it's cash obligations are so tight it
is so fearful of the b word that they have
to pay in stock or they might go bankrupt So
kind of armageddon ish scenario There cos will also pay
dividends in stock at times for largely the same reasons
but with different dilution dynamics Because in the case of
the equity owners of the company and people who own
their common shares all receiving you know pro ratted dividends
or equally the same number of incremental shares as dividend
meaning that the company is yes diluting itself but doing
so equally to basically everyone who is a common shareholder
So who does this screw in the process Option holders
Yeah employees usually like if they only own options they're
not entitled to dividends whether in cash or stock while
they get diluted away for there hard nonunion efforts Yeah
well this is called pick or payment in kind although
to those screwed over option holders there's a you know 00:02:55.183 --> [endTime] not much kind innit