So I made a rookie mistake awhile back by investing in a horrid OTC penny stock for a company known as Artfest International (ARTS) run by a CEO with a checkered past named Eddie Vakser. Back on March 15th, 2010 ARTS released the following PR:


Artfest International, Inc. is pleased to announce that all Artfest International Shareholders of Record as of April 15 will receive 1 share of Artfest Direct valued at $10 per share for every 1000 shares they own of Artfest International (ARTS) on the record date. The Company will be conducting an offering of Artfest Direct shares at $10.00 per share.

At the time of this PR and and on April 15th 2010 no company called Artfest Direct existed to trade publicly nor had FINRA granted them a cupsip number. Is it legal to offer a dividend of a subsidiary or separate company (I'm not sure what Artfest Direct is considered) that isn't traded yet and doesn't have shares? Furthermore is it legal to put a value on a dividend share of such a a subsidiary/company that hasn't traded nor has the paper work completed to be traded?

Here is the link to the PR from ARTS website:
March 15, 2010: Artfest International Shareholders of Record to Receive Artfest Direct Dividend Valued at $10 per Share


As a side note I highly recommend staying away from ARTS, I've lost over 90% of my investment and appears that the entire operation is a scheme built on mass dilution.