Member Info for jun_man

TheWednesday is correct, and others not IMHO (and as covered a couple of weeks ago on this board).

I think the confusion arises because the Entitlement (as defined) refers to an amount of money, not a number of shares, but many (myself included) assumed it meant a number of shares. Alarmingly, I think the Halifax’s instructions are incorrect and/or misleading.

The Tender cannot cost DEC more than $42m because that is the entitlement. What will change is the number of shares bought, depending on the final price used.

I had wondered if this would be how it played out, but having not heard a bean from HL ref the Tender Offer, I am not even sure I will be invited to participate, should I have wanted to. Have any other platforms put out any instructions?

@tonynostrom1 thanks, but that's not the only comment included in the announcement about dividends. Did you read the whole thing?

The bullet point in the highlights up front says "Dividends of £3.083 million were declared and paid during the fourth quarter, with total dividends of £13.298 million declared and £15.338 million paid in 2023. Additionally, the Q4 2023 dividend of £3.084 million was declared and paid in early 2024." None of that is new information and has been included in prior announcements. So one's response to this might be 'So what?'

In a normal set of company results, that bullet would say something along the lines of "The company expects to declare a dividend of X in respect of Q4, to be announced at the time of the final results and payable shortly thereafter". That way investors know up front that the dividend's in good shape. This is why I don't think it's surprising that someone would read the announcement and think there was no dividend, which was what happened in the post below and what I was responding to.

And as I said, this is all because the company is in a mess because of their previous decisions about the dividend, and feel the need continually to repeat the message about how much has been paid out in prior periods.

The only useful bit of information was much further down the RNS. Couldn't they have put that in the highlights? It's far more interesting, and anyone reading it would then immediately be reassured that the Q1 dividend was on its way.

It's not helped because the company (desperate to announce good news) keeps repeating historical facts as if they were new information. Most companies announce a dividend after the end of the period in question and pay it some time after that, so you'd get the Q4 2023 dividend announced in the FY results and probable paid towards the back end of Q1. Because of the shambles with the monthly dividend moving to quarterly, in each RNS the company continually refers to historical payouts. They refer to the dividend just paid as the 'Q4 dividend' because it was announced during Q4 (albeit the record date was just into Q1). It's good news on the one hand - the company is confident in its ability to pay the dividend - but it's also confusing.

They've done it again in this RNS, effectively 'pre-announced' the Q1 dividend, which I assume will be paid early April, before Q1 results are actually released.

Yes, will be interested to see if HL can get themselves organised and I am even offered the opportunity to participate...! The timeline is short.

This is the link to the article: https://www.ft.com/content/9065e3d0-09eb-4c0a-a8dc-61a69bc7ad16

But in case the link doesn't post or you don't have an account, if you just search FT Hargreaves Lansdown Upstart, you should get the link to the article, and everyone has a few free articles per month

Thanks both, appreciated

Not wanting to start the WHT discussion again, but I'm with HL and they do it correctly (only 15% withheld in ISA). Can clients of AJ Bell or II confirm they also get it right? I recall some on here have said their broker still removes 30%. I've just read the FT's Long Read on HL and think it might be time to make a switch...

Hi @TheWednesday

Ha! You are quite right - my apologies. The dangers of posting too soon. So total return in option 2 is £465 + £5,299 = £5,764 (-6.1% vs option 1). As you note, the share price would need to rise to c.£9.12 (+7% as you say) for the options to be equal.

It's OK @jim800, this is why it's a discussion board, not a forum for giving advice :-)

Further, (and interestingly.,,?!) if you like conspiracy theories you can start to speculate on what the company wants to happen to the share price between the record date and the close of the offer period. I note that the results announcement is during this period (which introduces quite some uncertainty to the outcome).

The company could be considered to be better off if the share price falls in the period, because they buy back shares more cheaply. Tendering shareholders are better off if the share price rises.

Most commentators here are of the view that this has been done in the interests of institutional investors. The RNS announcement refers to extensive discussions between shareholders and the company. Maybe the company has indicated to them privately that they expect to announce good results and so the tender then becomes the better option? The share price doesn't need to rise by much to make it the better deal... ; or maybe the company knows results will be worse than expected so they can buy back more shares for the same money. Who knows?! :-)

Hi @Bismarck

Well, at the end of my second example you’d own no shares, but that’s because I misread the RNS! I thought the entitlement was being measured across the entire shareholder base, ie it would be possible to tender for all of your shares if you wanted, and get bought out entirely. And that if there were more tenders in total than US$42m, offers would be scaled back pro rata.

Re-reading the RNS, I see that a shareholders’ entitlement is defined as the payable dividend amount.

So my corrected option 2 is:

Option 2: you accept the tender offer in respect of your entire entitlement (£468). At the end of the VWAP calculation period, we assume the share price is flat and remains at £8.52. DEC pays you £8.52 + 5% = £8.95 for each share, so you tender 52 shares. NB the company keeps the £2.60 left over. You will get paid the dividend on the remaining 622 shares, so £367 after 15% WHT. Your total value at close is £465 (tender) + £367 (dividend) + £5,299 (622 shares you still own) = £6,131.

This is still below, but closer to, the £6,140 if you do nothing, because you’ve only had the worse option (tendering) applied to a small proportion of your shares.

Again welcome corrections and DYOR.

Quite. I might not be quite so direct about it, but Coaj your worked example is incorrect.

My current understanding, using some of the figures in example, is that the options would be as follows:

Option 1: you have 674 shares, you receive c.£398 in dividends, after 15% WHT. For the sake of argument the share price today is £9.20 and we assume it doesn't change between now and the close of the tender offer (obv you can assume the share price rises or falls). What we do know, is that after it goes ex-div on the 29th, the share price will fall to c.£8.52. At the end of the whole process you'll still own 674 shares (worth £5742.48) plus you'll have received £398 in cash, so a total value of c.£6,140.

Option 2: you accept the tender offer in respect of your entire holding. You don't get the dividend. At the end of the VWAP calculation period, we assume the share price is flat and remains at £8.52. DEC pays you £8.52 + 5% = £8.95 for each share, so you get c.£6,030.

Option 2 leaves you about 2% worse off than option 1. Without bothering to work it out, I assume this is the difference between the quarterly dividend yield * 0.85, and 5%.

Someone please correct me if I've got the above wrong.

Machin, I think you are being too hard on yourself! You've made the point oft missed on this board that the share price impact of buying back the shares (i.e. acting as the bid) will almost certainly (and mostly is) be overwhelmed by all of the other factors that might drive a share price up or down. The buyback is highly unlikely to cause a share price to increase simply because it is someone buying shares. There is never going to be enough volume to have this impact.

On the other hand, the reason why buybacks are useful is that, from a corporate finance / capital structure / cost of capital perspective, they increase the value of the company. So, all other things being equal, the share price should rise because the company is worth more (per share) than it was without the buyback. But this would happen because investors recognise that the company is more valuable, and this also may not happen, or negative factors impacting the share price may outweigh this in any event. Whether people don't like buybacks because they think management should come up with a better use for the cash is a fairer point also. If the best value investment a Board can come up with for the use of cash is to buy their own shares, then that suggests they might be at a strategic dead end. But not always.

The purpose of the tender offer, broadly speaking, is to allow the company to use the funds set aside to pay the dividend to buy back shares, without having to cut or reduce the dividend to make such funds available to buy back shares.

@LOTM-13 thanks for this post. I think you are the second person, maybe the third, who has flagged the option (if you're in funds) to buy the relevant number of shares in the lead up to the record date, tender in full, and effectively have those shares then bought back in the tender. I need to get my calculator out and do the detailed work, including the WHT and transaction cost aspects, but I *think* this is the best way of playing this. You are still exposed to the share price movement between the record date and the VWAP calculation date, but if you're long and believe the share price is going up, you should be happy to take this risk (noting that the share price will of course be re-based after the ex-div date). I need to the detailed calcs, but instinctively this feels like an option worth exploring.

My assumption would be that the tender offer is not subject to the witholding tax (DYOR) so if you are paying the 15% or 30%, you'd save that if you participated in the tender offer. On the other hand, if you plan to reinvest the income in DEC shares, there may be higher transaction charges. Certainly with HL reinvesting the divi is free, whereas buying the shares on the market carries an £11.95 fee. All relevant factors to consider in the decision.

Everyone has their own strategies, but I'd be cautious about one that is simply based on a share price falling. On that basis why not VOD or PHNX? Both have their complexities and issues, but also meet the requirement of having a share price that has tanked. And there's 1000s of VOD investors who are still nursing heavy losses after several years. But good luck with whatever you decide to do!

I don't think DEC is where I'd start if I was an inexperienced investor. It's business model is financially complex, and misunderstood by many, and there are a large number of macro factors that are impacting the share price, today and historically, and one may assume in the future.

If you're here because you identified it as a high yielding stock, I'd recommend starting with the high yielders in the FTSE 100 (of which there are several) and take it from there. And of course, DYOR.

I've seen this mentioned several times on the thread now, that somehow the dividend is an issue for the shorters, can someone help me understand where I am going wrong? I don't see why it's a factor.

I get that those who are short need cash to cover the dividend for those from whom they've borrowed the shares, but they benefit an equivalent amount when the share price is rebased downwards on the ex-dividend date.

The payment of a dividend is always a neutral transaction for you if you are long (an asset is being moved from one 'pocket' to another 'pocket', but it is not in itself a value creating transaction). Why is it any different for someone who is short?

Having a long position, I have the reverse cashflow situation. On the ex-dividend date, the value of my assets will fall (on paper) and a few weeks later I am compensated for that fall through the receipt of cash. For the shorters, the value of their position rises (on paper) and a few weeks later they need to cover a cash outflow.

Won't the shorters just close out a sufficient amount of their position once it's gone ex-dividend to free-up the cash they need to cover the dividend? They're already sitting on it from when they sold the shares short in the first place. Apologies if I'm being slow.

It remains a complete mystery to me how this continues to be range bound £5 - £5.25 with the news and operational performance being as it is. Like others, I read the update and thought we'll see a 5%+ bump, but nothing. I don't get it.