Thanks to a shareholder-pleasing move, Cassava Sciences (NASDAQ: SAVA) stock was an outperformer in the biotech sector this week. Over the period, the company's shares gained 21% in value, according to data compiled by S&P Global Market Intelligence.
A nonstandard dividend declaration
On Tuesday, Cassava announced that investors in its common stock would be paid a rather offbeat dividend: For every 10 shares they own, they are to receive four common stock warrants. Each of these securities entitles the holder to purchase one share of common stock for $33. For that price, the buyer can also receive, at no additional cost, a "bonus share fraction" of 0.5 share.
The biotech has set a list of conditions to receive the bonus share fraction. These are tied to the timing of the issue and the market price of its common stock. Cassava said it will formally announce the expiration date of the bonus program, although it provided no specifics.
Speaking of expiration dates, the warrants in general expire on Friday, Nov. 15, 2024, at 5 p.m. ET. They may be redeemed for stock on or after April 15 of that year, provided the holder gives the company 20 calendar days' notice.
It's not cash, but...
We can safely say that most stock investors prefer the traditional cash dividend, but this atypical means of stockholder remuneration also has its merits. Cassava is an up-and-coming biotech, and its share price might well experience a pleasant lift next year. Even if it doesn't, investors are basically getting free stock; Cassava bulls will be happy to earn fatter stakes in their company.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
