In theory, once a stock trades ex-dividend, its price should adjust downward to account for the dividend. We rarely notice this adjustment with ordinary dividends, because the dividend amounts are relatively small, and the adjustment is often obscured by other factors affecting the stock.
But with the size of some of the special cash dividends, you should see a noticeable decrease in stock prices on the ex-dividend date. In Electro Scientific Industries' case, all else being equal, this will be a $9 stock ex-dividend. (Shares were trading Wednesday morning at $11.36, up 15 cents on the session.)
All the fervor about these special dividend-paying stocks and the price jumps due to the dividend announcements suggest to me that there is a new inefficiency being created, and that there is money to be made on the short side of the equation.
I am not a short-seller, but those who are may have found a new way to exploit this potential inefficiency over the next couple of weeks. Find a stock that jumps purely due to a special cash dividend announcement; if the market appears to overreact to the plus side, there may be opportunity. Certainly not my cup of tea, but I would not be surprised if it's already being done.
At the time of publication, Heller was long ESIO
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.