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I have been invested with RBS, and AML when they went for consolidation. RBS was a damp squib, but the recent AML has worked well in my view. Time will tell in the case of TSCO. JJ
all in my humble opinion of course
Hey I coined that "Scorpion Dividend" lol ...I am well pleased to have bailed on this a few weeks ago, it was never going to go near the 2.59 let alone the broker forecasts this side of the SD. What I am not best pleased about is I had tunnel vision for a year around this Asia disposal and positive broker forecasts. As the situation around the SD became clearer with hindsight this was one in all honesty to have dumped at 2.59 last year and moved on. The thing to my mind is quite clear is that as far as investing in TSCO is concerned with potential upside is this is now on the other side of the SD. I am however for the first time extremely concerned with the BoD team who decided to opt for this SD. This is the first major wrong step in a long time and my concern is there may be more to come. In the light of the SD i also see the repayment of the rebate as a mistake. Tesco incurred significant costs from the outset of the pandemic and imo now was completely entitled to that rebate. Of course because of the SD all the talking heads would be screaming for a windfall tax on Tesco because of the profiteering and the shareholders filling their boots, when in actual fact they are not profiting and in some cases actually incurring losses via tax liabilities. That would be too much for the talking heads to understand because hey its a Special Dividend and share consolidation would be ignored. Stock split GOOD ...Stock Consolidtion BAD.
30th of jan there was a few speculating about the dividend,
Also as mentioned but missed that day and it’s a good point Tesco sold and leased back properties to fund their global domination attempt, now why on earth not buy back the leases ? In effect it’s like a equity release, a fair point in this Scorpion dividend fiasco ooh I mean SPECIAL Dividend of course
Rosy I’m sure I said with less shares in the market the dividend would rise to 20% as let’s say they made 2 billion, 1 billion they give to shareholders which was 9.21p last year so if they made 2 billion again ( we will have to see as there’s the cost of covid to come out unless they put that under another sticker of course) so 20% less shares I wouldn’t be surprised if the dividend is 11.5-12p for the year actually making a nice 4% if I may say so ,
''In due course the SD is paid out, the value of TSCO has NOT altered, hence my 789 shares will I've calculated be priced at around 313p''
The current market cap of Tesco takes into consideration the Billions of pounds sitting there ready to be returned to shareholders. When the capital is returned via the special payment the
assets of Tesco will be reduced by that amount.
You will only get an increasing share price after consolidation from buying demand/ market rerate .
''Before the close on Friday''
HSBCinvestdirect are suspending trading on Tesco at 16.00 TODAY to allow time for the consolidation.
Share consolidation in principle should increase the share price proportionately in the short term at least. (New 15 shares being worth old 19 shares) but in this case, it is unlikely to happen as the SD is going to come out of Tesco monies at the same time. The share price, in theory again, should stay about the same after consolidation. But in my experience, consolidation is bad news (c.f. stock split, which is generally good news) for the share holder. The SP will most likely languish rather than increase in the near future.
Hi jimjam, et al,
As a holder of Tesco shares myself I very much hope that you're right and that early next week the price of the ("new") Tesco shares is about £3-13, but sadly I think that will *not* be the case, and, everything else being equal, the price of the new shares will be very similar to the current price of the existing shares. My own reading of Tesco's literature and announcements is that the whole exercise has been designed to result in the "before" and the "after" share price being about the same. However, because the dividend value (per share) is fixed whereas the share price itself moves in the market, the "before" and the "after" share prices can only be the same with one value of starting share price, and I think that is £2-42.
I have put together a complicated spreadsheet that works out what the "after" price would have to be for any given "before" price for the individual not to lose out, and the results are interesting. At £2-42, the "before" and the "after" price are the same, but the higher the "starting" share price, the higher still the "after" price would have to be so that one didn't lose out. I will re-check my formulae in the morning (I'm very tired now!) but the results for the "before" and the "after" price to maintain the same total value (including the special dividend) are, for now, as follows ("before" is on the left, and the necessary "after" is on the right):-
£2-20 / £2-14;
£2-30 / £2-27;
£2-35 / £2-33;
£2-40 / £2-39;
£2-42 / £2-42;
£2-45 / £2-46;
£2-50 / £2-52;
£2-55 / £2-58;
£2-60 / £2-65;
£2-70 / £2-77;
£2-80 / £2-90.
Of course the Tesco share price doesn't operate in a vacuum, and a lot could happen between now and next week!
Good luck all.
so is the expectation that with less shares in the market all be it a higher price , it will generate an upward trend .... in theory that is
So in effect it’s the opposite of general practice to raise more cash.
They have to much .? and need to offload back to share holders to carry the wight ....sort of .
Tesco are essentially cancelling approximately 21% of their shares. There are a number of ways they could do this but the two obvious ones are:
(a). by way of a special dividend
(b) by going in the market and buying up shares and then cancelling them.
However, going down route (b) would most likely result in the share price going north and therefore it would cost Tesco much more to buy 21% of their share base than adopting option (a). In other words option (a) is good for Tesco but not good for small PIs who decide they have to sell their TESCO shares by COB on Friday 12th February to avoid paying tax on the special dividend.
No better no worse .....what kind of statement is that !!
Special divi sharing spoils and no better no worse ?
Shouldn’t have bothered then maybe....
prussell1963, as I see it today I have 1000 shares and own X% of TSCO, and after consolidation I will have 789 shares but I will still own X% of the Company. In valuing the Company today perhaps we should look upon the SD fund as a debt which TSCO has to clear, with the monies being ring-fenced and set to one side; and so importantly it is ignored by the 'markets' when pricing the shares today/tomorrow. In due course the SD is paid out, the value of TSCO has NOT altered, hence my 789 shares will I've calculated be priced at around 313p( still allowing me to own X%). Lets hope I'm right. JJ
P.S. Buy now if my view makes sense-THIS IS NOT ADVICE-good luck all.
EPS improved too with less shares in circulation. Just a thought in relation to institutions. Schroders are moving out of MRW but there has been no holdings RNS from TSCO. You can only assume they are content with their investment here. Surely, if this SD was unfavourable to them you would have expected the opposite. Especially when MRW have slightly increased market share.
I have yet to see anyone post that the Tesco dividend policy will be more generous. No one has said that, that is the subject of an RNS. All that has been said is that the dividend pot will be shared between a fewer number of shares.
Posters keep stating that the dividend policy will be more generous as less shares to spread amongst. That is NOT the case. The dividend pot is defined in terms of an amount, eg xyz Billion. That is then divided by the number of shares but whilst the amount per share is higher after consolidation, remember you now have 15/19 shares so receive the higher amount on less shares, net result = EXACTLY SAME.
It does have the effect of making the yield look higher so we may go from 4% to 5.5% but that's a reason to not increase the dividend in future, yield already high enough. It will also look attractive to new purchasers and be good for raising capital in future fund raising offerings . In short, it's good for TSCO but of little/no benefit to PI's.
JJ, surely after consolidtion you WOULD (excuse capitals) expect to be better poisitioned by the amount of the spec divi per share. I would hate to see that the share price stays the same circa 247p as surely with less shares in circulation x share price the capitalisation of the company is less.? I had hoped to see a clear benefit delivered with the spec divi (£1300 in my case) but this will not be the case after consolidation. I will have fewer shares (by approx 537 shares which equates to £1326) . TSCO Board has already said they dont expect share price to change and I assusme they mean reduce on ex dividend basis (51p). So my £1300 thank you dividend has been clawed back by reducing my shares. This would have been fine if the apitalisation had increased share price (fewer shares covering the same business value gives increased price per remaining share). This only works favourably if the sp does increase sugnificantly quickly to reflect better value based on above, but this wont happen. I think a sell off after spec divi as owners see the spec divi doesnt actually deliver and share price will come under pressure, especially as those who purchased at sub 240p (seemingly the magic number) take their spec divi and sell their remaining holdings, as we dont actually get 51.3p of value when consolidation is taken into account. Smoke and mirrors and slight of hand definately come to mind. I am assuming that the institutional investors have a view, but cannot find out what it is!!
Just a thought but how many investors have sold to avoid any tax obligations and intend buying back Monday. Trading should be interesting on Friday and Monday.
Before the close on Friday
Can anybody advise on the following, if I don’t wish to receive the special dividend when is the last opportunity to sell.
Well said!! ?? Tesco have said that they don't expect the SP to alter!!! Let's hope that they are correct, after all, this is extra cash coming from another source!! ?????? let's hope!! ??
After the consolidation I think we will be in the lap of the Gods regarding what share price the market makers let this settle at. I have read so many theories of what will happen after we go ex-dividend on the 15th but we will just have to wait and see what we are supposedly valued at by the.......ahem..... expert fair value market makers.
If we wake up post consolidation, log in to our respective trading accounts and the value of our shares is more than circa 51p less than the day before, then we have been cheated by a financial sleight of hand. The board stated that shareholders will be rewarded with a special dividend and the whole point of a company paying a special dividend is normally as a sort of thank you and spreading of the financial love after a positive event (the sale of the Asian business). Yes we can argue that Tesco have sold a profitable chunk of the business but a bird in hand springs to mind, especially considering the state of the global consumer economy.
We are being consolidated so it will show less shares in our accounts but the value of the shares should be higher due to there being less total shares in issue. All future dividends will be paid out to less shares so in theory we will receive a more substantial dividend provided Tesco do not negatively alter their dividend policy. As long as we continue to be profitable in our core markets our earnings per share will hopefully grow along with the dividend and who knows what future acquisitions the board may be pondering. I personally would like Tesco Bank to become a thing of the past so hopefully a financial institution will make an offer to take the whole thing off our hands for a reasonable price. It hasn't worked out so just take the hit, sell it off and free up the manpower to focus on what it is we do best.
Another big plus is the fact that circa £2 billion has been contributed to the pension fund. That is a substantial sum of money that has effectively plugged a huge financial gap and removed a considerable risk which I would hope will be taken into account when the market makers decide how we are valued post consolidation.
I do not believe the markets are efficient and I'm sure we all can point to examples of companies being woefully valued and then corrected either up or down when reality strikes and the official accounts are published. From what I can see, Tesco appears to be a solid company with a now manageable pension fund and I'm hoping we are valued as such once the end of year results are announced.
Whatever happens I'm betting that being in Tesco will provide a positive return over the next few years and barring any 'accounting irregularities' I prefer being in this share than leaving my cash in the bank.
All the best to all the best.
Prussell1963.... you are correct in your calculations, don’t forget however that you may be liable for tax on dividends received. Currently zero rate upto £2k, but if you go over that threshold the rate moves upto 7% and if you move into the higher rate it’s 32.5% tax.
Retaining the shares in a normal share trade account is fine if you won’t cross the £2k tax rate- that’s all dividends through the year btw..
I’m no tax advisor..... I’m just someone who pays tax!
Gl with your money
And that puts the share price after consolidation at about 313p based on todays of 247p. And that's why I have bought TSCO, and as long the share starts trading above 247p I have not lost anything . JJ