Allied Brands Ltd. (ABQ) has sent a hugely expensive mail out to current shareholders, offering them more shares in this failed investment rather than paying out their promised .05 dividend. This was a dividend for the last financial year, which they promised to pay out of THIS YEAR'S income because they had no cash to pay it properly.
The summary of this ill-fated idea is filed HERE.
The company has issued almost 60 MILLION new shares since this dividend was first promised at the beginning of the year. So the amount the company is committed to pay has increased by 30% - the cash raised by these new shares is long gone on company cars, bonuses, and increased management salaries.
This is clearly an indication that the company cannot afford the huge cash hit the promised dividend payment will extract from the dwindling cash available to the company. Insiders report that franchisee support jobs currently empty are not likely to be filled anytime soon due to the cash shortage.
And now this evidence that ABQ doesn't even want to pay their promised dividend!
And in the Allied Brands "after Xmas" sale, they've even promised a 10% discount on these reinvested dividends! In other words, this company is so desperate for cash they're willing to pay more than double the Reserve Bank cash rate.
For a company that first issued shares in 2004 at .45 cents, which are now at less than .17 and falling, what investor thinks handing these failed managers MORE MONEY would do them any good? You don't give a failed company MORE MONEY, you take it out. Averaging down is a sucker's play, as is the continued dilution of shares in this company just to raise more cash. With the 10% discount, the ex-dividend share price of Allied Brands should again dip below .12. And even at this price, it's too much!
You might do better flushing your cash down the nearest dunny!
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