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Looks to me after consolidating you are worse off or is it me ..say you have 19 shares at £2.45 which is worth 46.55 add special dividend =56.05 take your 19 shares down to 15 so your 15 shares are worth 36.75 plus your 9.50 for special dividend equals 47.25 so you are worse off are you not.??? Correct me if I'm wrong
Or are you better off
Sorry my maths are **** looks like your 70 p better off for every 19 share you own lol
Billy boy
The consolidation happens AFTER the special dividend and your ownership of the company does not change
I agree with billyboy56, shareholders lose on this deal based on today's SP at start of trading.
Earnings per share will be higher which will or should attract more money from the city. Will be interested if the yield will increase by the percentage number of the share consolidation. A yield of about 4% has to be attractive to any investor especially when all that money is sat in a bank account earning nothing.
I guess those private investors that thought buying in the short term just for the SD will move on and the institutions mop up those shares a little cheaper.
Very high level: The value of a company is assets - liabilities + an estimated value of future profits.
What happens when a company pays a dividend... cash decreases i.e the assets go down therefore your market cap goes down. the rest (share consolidation) is just noise. The market will decide what the market cap should be and adjust it very quickly.
Please correct me if I’m wrong.
The share consolidation is reducing the number of shares in circulation by the same amount of the dividend.
There will be 20% less shares in circulation?
Which should drive the price up to nearer £3 in the short term.
PH
''Which should drive the price up to nearer £3 in the short term.''
The market cap is being reduced by 50.93p per share
PH
If the money had been used to buyback shares in the market for cancellation then that would have had the effect of an upward pressure on the share price
Ah thats good then Rosewall
If the current share price post-consolidation is exactly the same and we assume it's 240p (for my simple maths). Some will be marginally better off and some marginally worse off. It depends on your fractional entitlement which you will lose as it's being given to a food bank charity.
I will lose 0.105 of a share, but be marginally better off. However if you hold, for example, 1000 shares you will lose nearly half a share and be fractionally worse off.
In my case..
Current holding:
15,000 shares @ 240p = £36.000
Post dividend and consolidation:
15 for every 19 shares = 11,842 shares @ 240p = £28,421
plus 15,000 times @ 50.93p dividend = £ 7,639
Value = £36,060.50
Of course all this assumes the share price will be exactly the same after the ex-dividend date.
I'm a long-term holder in TSCO and will continue to hold, but if I didn't hold my shares in an ISA I'd be very tempted to sell now and buy back post-consolidation to avoid all the unnecessary hassle and tax calculations. I think this is why the shares are under-performing peers at the moment, but should hopefully redress the balance if and when people buy back in. Please DYOR.
billyboy56...8:39 post
Hi,you are correct,we would be slightly worse off by accepting SD whilst keeping current shares that would be consolidated.By doing so there will be reduced number of Tesco shares in issue.Can though anybody be sure that the newly consolidated shares' price will rise by the SD price?i think its a gimmick played by the Company BoDs.Stach
i’m in that exact situation of 1000 shares.
unsure what to do now, sell before and make a small profit (maybe 150 at current price) or hold and get the £500 but lose 211 shares.
IAPR...you wont be better off or even . because If you take your cash invested 36,000.and divide it by your new reduced holding of 11,842 your break even is up to £3.04... therefore your shares are sitting at a loss , presuming price is £2.40 per share .9as per your calc)
with price dropping like it is I am going for dividend and hoping in short term price will creep up to £3.00 .
MOSt Private Investors likely have these in a sipp or isa I would reckon by a substantial margin
Not forgetting that approx 4000 shares will not be taxed if you have not used up your annual dividend allowance.
Nigella... Theoretically if I leave the special dividend cash on account in my ISA and share price is exactly the same post-consolidation (240p) my ISA value will be £60 higher. However, in practice, you're right because my intention at the moment is to use the special dividend to restore my original holding and I'll have to pay stamp duty and commission on this transaction.
Hi all,
It's my first-ever post on LSE, so please be kind!
As a reasonably long-term holder of Tesco shares I've read today's RNS, and most of today's posts about it. Most of my comments are from first principles so am open to being corrected if/where I'm wrong. Firstly, what's right or wrong for any individual investor will depend not only on the "before" and "after" share price, but also on their own tax position.
The Tesco share price cannot be totally detached from the broader market. As I write this, the FTSE is down some 22 points (0.3%), which must be a contribution to this morning's slight fall in Tesco. Secondly, the *effect* of what they're doing is a capital reduction, whereas the *mechanism* in this case is a Special Dividend. Thirdly, the trading performance of Tesco in terms of revenue, profit, etc, and therefore its total value, is, as I see it, not affected by whether it has a large number of "small" shares or a smaller number of "bigger" shares. However, presumably doing the consolidation involves Tesco paying someone (investment bank?) a fee, which of course is then money going out of Tesco and being lost to shareholders. To what benefit?
Ultimately no-one can predict exactly what the share price will be immediately before these transactions (Special Dividend and then Consolidation), or immediately after them.
How beneficial, or otherwise, this will all be to any individual shareholder will probably depend on his/her tax situation. In my own case, the large dividend will push the dividends this tax year above the dividend threshold (from memory £2,000) where otherwise it would have been below it (as, this year, so many of my other dividends have been reduced or scrapped). So I will have to pay income tax (7%, from memory) on some of my dividend. If it had been done by other means, I wouldn't have had to pay any tax because this year I'm way below the CGT threshold. Another consideration, which becomes slightly less trivial the smaller one's holding is, is that unless you start with a multiple of 285 "old" shares (15 x 19) you will not end up with an exact number of "new" shares after the consolidation, so you will lose a fraction of a share (the value of all these, Tesco says, will end up going to charity).
I hope I haven't confused things further for anyone!
Mike.
Spindler
Most PIs certainly. Most colleagues in Eqiniti , well that is a different matter
Mike
Thank you for sharing your thoughts and taking the time to post them.
Pretty much sums it up and of course every investor has a different financial position that will ultimately decide on how to proceed.
All this chat about today’s news is overshadowing the positives and some investors may be spooked into selling. TSCO have sold 2 loss making businesses, paid some cash into the Pension pot and reduced running costs of it. EPS will be better which should attract more institutional investors with many having annuity payments to honour.
Free float reduced.
The yield may be increased to reflect the consolidation and as proposed today the option to buy their own shares.
I could go on about the fragile wider over priced markets and savers that will be looking elsewhere to get an income from their cash as negative interest rates loom.
Leas,
Thanks for your kind words, and your own comments.
The only bit I'm not too sure about is "The yield may be increased to reflect the consolidation". I guess if the overall company is making "x" profits, and these are larger going forwards because it's relinquished a couple of loss-making businesses, it can afford to pay a bigger overall dividend (in £ terms) and that dividend now gets divided by a smaller number of shares, so the dividend per share could be higher and thence the yield. And this with a smaller pension deficit to service. How much all this good news is already reflected in the share price only time will tell.
Mike.
You make some good points MikeM14...slip overall on the FTSE 100 and also going forwards less shares should mean higher dividends and the trajectory was already upwards on the dividends. There will no longer need to be funds diverted to Pension after the deficit payment and add the stellar year they have just had that is continuing. One of the few companies on the London Market that has been able not only to trade but to make hay
Post SD what about further lift under Tesco's wings as reinvestment of SD goes back into Tesco ?
Actually when I looked TSCO was down 1.18 with the market down 1.18 as well so they are pretty much tracking the same