Why the Thorn Group (ASX:TGA) share price is plummeting 22% today

What’s driving the company’s shares deep in negative territory?

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Key Points

  • Thorn Group shares are trading ex-dividend
  • The proceeds of asset sales will be distributed to shareholders
  • A special dividend of 7 cents is to be paid on 9 February

The Thorn Group Ltd (ASX: TGA) share price is one of the worst performers on the All Ordinaries (ASX: XAO) so far today.

At the time of writing, the diversified financial services company’s shares are down a sizeable 21.74% to 27 cents apiece.

Why is the Thorn Group share price falling today? 

Investors are selling off Thorn Group shares after securing a special dividend today.

Last week, management announced that it completed the sale of the Radio Rentals consumer finance business to Credit Corp Group Ltd (ASX: CCP).

Thorn received a cash consideration of around $44 million, with an additional $2.3 million on a deferred basis.

As such, the board decided to return the surplus funds to shareholders, totalling $23.792 million. Each eligible investor will collect a fully-franked special dividend of 7 cents per share.

In addition, the directors decided to temporarily suspend the dividend reinvestment plan (DRP) for the special dividend.

What does this mean for Thorn Group shareholders?

Typically, one business day before the record date, the ex-dividend date, is when investors must have purchased shares. If the investor does not buy before this date, the dividend will go to the seller.

Historically, when a company reaches its ex-dividend day, its shares tend to fall in proportion to the dividend paid out. This is because investors tend to sell off the company’s shares after securing the dividend.

For those eligible for Thorn Group’s special dividend, shareholders will receive payment on 9 February.

It’s worth noting that because the dividend is fully-franked, this means investors can expect to receive tax credits from this.

Thorn Group share price snapshot

In the past 12 months, the Thorn Group share price has gained around 53% despite today’s significant drop. The S&P/ASX 200 Consumer Discretionary (ASX: XDJ) index is up around 7% over the same timeframe.

Thorn Group shares reached an all-time high of 36 cents last week as investors moved in to secure the special dividend.

Based on today’s price, Thorn Group commands a market capitalisation of roughly $93.47 million, with around 340 million shares outstanding.

Should you invest $1,000 in Thorn Group right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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