It was only eight months ago when the management of
Sprott Resource Corp.
(TSX: SCP) announced that it would institute a lucrative dividend. At
the time, current Sprott Resource investors, while maybe a little
confused, were for the most part willing accomplices. After all, the
initial rate would give them a handsome yield and pushed the price of
the stock up over 10% on the day of the announcement. The stock
continued to soar as income oriented investors piled in, laying there
claim to a juicy yield of over 10%. A few weeks after the
announcement, the stock was up over 24%.
Fast forward to the present. The stock price is now down roughly 20%
from where it closed the day prior to the dividend announcement and
down over 40% from its 2013 peak. Why the crash? Management decided to
pull the plug on the dividend and in the process, pulled the rug out
from under its investors. Even with the hefty yield, investors that
bought after the dividend announcement still find themselves, for lack
of a better term, holding the bag. The only good news…the bag is
loaded with potentially valuable assets.
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