Member Info for TheWednesday

Shouldn't do, because it now has £10m more in the bank which is representative of those new shares.

The important word there is "shouldn't"

GLA

If only...

I personally love the buy backs as I think they pave the way for long term divi increases and capital growth. I just wish they'd also suspend the scrip (drip) option, thus making the effect of these buybacks even more pronounced.

I know they've said divis will grow by 4% year on year, but if they manage to take another 5% of the shares out of circulation in the next 12 months then there is no reason why the divi won't be raised by 9-10% again. The divi should naturally rise by 5% due to the reduced number of shares and would only cost the same to BP, then add on an actual 4% rise in the total divi pot.

If buybacks continue at this pace I expect divi announcement this time next year of 6.6c ish.

IF they increase it,

which they most likely will.

Same percentage of a smaller whole.

£1.0169 was always the figure quoted in the Aviva circular.

Your 2500 shares MAY be getting 31p dividend next year.

You will be a bit better off because if you bought your 600 shares at £3.90 they will have cost about £2,352 ( £2,340 plus stamp duty and approx £10 dealing charge). When the B share money lands in your account it will be £2,542 (2500 x £1.0169).

You've gained approx £190 and played it very well.

GLA

May just be due to the fact there is less liquidity in the market for pref shares than there is for ordinary shares.

I have occasionally had the same thing with AIM listed shares. No problem buying them, but when it comes to selling them, on rare occasions I have received a message that a sale is not possible at the given time and that it needs to be a negotiated sale. Only happened once or twice, and I have put it down to the fact some of these AIM shares are incredibly illiquid and can go days without a single trade.

GLA

Not quite so neat as it appears though is it?

They may save £3.75bn (roughly) on the cost of acquisition, but then what they are buying will have £3.75bn less cash in the bank.

It's like being offered the chance to buy a house and an accompanying acre of land worth £250k today for £1m, or wait until next week when you can buy it for only £750k, but the acre of land has been removed from the deed and now belongs to someone else.

GLA

Paul,

my previous post took me so long to write that I have missed the fact the disagreement seems to have been resolved!

GLA

Paul,

in all honesty, there is no XD date as there is no dividend. But that's just semantics.

But what you are suggesting defies all logic. According to you, if I currently held 10,000 Aviva shares and sold them right now I would receive £40,000 (at current £4 per share). PLUS, I would receive £10,000 next Thursday (rounded B Share money to £1 for ease of figures), 19th May (or a couple of days after). So my position next week would be that I own no shares but have £50,169 in cash.

Now supposing "John" bought my 10,000 shares today, he would have paid out £40,000 and will hold 10,000 Aviva shares. Now next Monday (16th) John will wake up to find he has only 7,600 Aviva shares, which at a share price of £4 will mean his holding is worth £30,400 (for the purpose of the example, I am assuming no normal market fluctuations but a steady share price over the next few days. I have also assumed the consolidation has done it's job and ensured that the share price opens on Monday morning at the same price it closed on Friday afternoon). Now, unfortunately for John, he will not be getting the £10,000 B Share cash as that will be returned to me.

This clearly leaves me approximately £10k up and John £10k down on the deal, and all has taken place over the weekend. If this were the case everyone, including fund managers should be selling all their Aviva shares today, and no-one in their right mind should be buying.

However, the situation depicted in the example will NOT happen, because if I were to sell 10,000 shares to John today, it would be John that gets the £10,000 B Share money, as it is designed to return HIS capital that has "lost" through share consolidation.

I will not be getting £10,000 because my shares were never consolidated, I sold them all at the market value, thus we are both in our respective correct positions, John having in fact benefitted a little because the capital return figure was set when the share price was approximately £4.26.

GLA

Absolutely correct.

If today was exdiv day for the B Share scheme the shares would now be trading at around £2.98.

It is ridiculous to believe that you can sell your shares today and receive £4, plus the £1.01 in the future, effectively valuing them at £5 currently.

Similarly, it is unreasonable to believe that someone paying £4 today would be happy to see 24% of that value wiped out next week when they see their shareholding reduced by 24%.

The WHOLE point of the share consolidation is that it is the person who holds the shares after the event (ie the one buying them today) receiving the B Share money (£1.0169 per share) in order to compensate them for the reduction in value of their shareholding next week by 24%.

The one selling them today will not get the £1.0169 B Share money because they are in effect selling that entitlement when they sell today at £4. The £1.0169 is built in to the £4 they sell for today. The £4 share price today is in effect £2.99 for the value of the share plus £1.01 in future income.

GLA

Hitman,

the 31p future dividend is not confirmed at all. The literature makes this clear on several occasions.

It is fairly likely, and anything less will look like an own goal, but let's be clear, the 31p for 2022 and 32.5p for 2023 are only targets at the moment.

Staycool,

they are returning £3.75bn not £1.6bn and you are getting your share.

It is a return of capital, not a gift. They are returning to shareholders something that we already own.

The current share price is £4.32. Part of that (£1.0169) is represented by the £3.75bn cash that is currently sat idly in Aviva's bank. As a shareholder you already own that £1.0169 that Aviva are currently holding for you. The rest of the share price (£3.3031) is made up of other assets Aviva own as valued by the markets.

Aviva are simply returning the £1.0169 that is already yours back to you. It will now sit in your bank instead of Aviva's. As it no longer sits in Aviva's bank, it will no longer make up part of the share price, hence the 76:100 consolidation to restore the share price to £4.32 instead of it falling to £3.30.

We are not being given anything that is not already ours, but neither are we losing.

Short term this will make no difference, but if Aviva's confidence in being able to generate and grow future profits is proved correct, it will reward shareholders in the long run.

GLA

MrMath,

Aviva state (in the circular) that the intention is for the B shares to be redeemed on 17th May and for the proceeds to be paid on the 19th May. The message you got is correct and we should all expect payment of our £1.0169 to be paid on 19th May along with the ordinary dividend of 14.7p.

However, Aviva also caveat that (again in the circular) to suggest that the proceeds of the B share redemption will be paid NO LATER THAN 10 working days following redemption (17th May) and that the LATEST date this can be paid is 31st May.

They will also pay any funds accrued from part entitlement to shares following the consolidation, so a few pence, on 31st May.

My guess, and it is only a guess is that we will get both the ordinary dividend of 14.7p and the 101.69p together on the 19th May.

GLA

Hitman,

that doesn't paint a complete picture though does it as it?

Your statement implies that for the money you have invested today you will be enjoying around 7.25% returns via future dividends.

However, let's assume you bought 1000 shares today (we'll ignore all fees and stamp duty for ease).

1000 x £4.28 = £4,280. So, if you were to receive 31p for each of these 1000 shares you would receive £310, which is in fact approximately 7.25% return on £4,280.

However, by the time the 31p dividend is realised (if it is), you will only be holding 760 shares, so will receive a total dividend of £235.60.

You will also have received £1,016.90 (1000 x 101.69p) as a result of the return of capital. So the cost of the 760 shares you still own is £3,263.10 (£4,280 - £1,016.90).

Technically the yield you will be getting will be around 7.25% (£235.60/£3,263.10).

Pedantic, I know, but the way your post came across it may make people think that any money invested in Aviva shares today will earn them a yield of 7.25%, which is not true.

GLA

Postman,

according to the timetable in the circular you will receive the 14.7p ordinary dividend on 19th May, AND the 101.69p return of capital from B share also on 19th May.

Devon,

I wasn't meant to be stating the SP will be exactly the same following consolidation, I was simply trying to get the point across that it will not immediately fly up to approx £5.70 like a lot of people seem to.

The point of the consolidation is to maintain status quo, to leave the post consolidation SP the same as pre consolidation. i.e. to create an illusion that nothing has happened at all. However, this assumes no ordinary trading.

Obviously when the market opens the price can move in either direction and by any amount, as it does on any trading day. I think it will continue to float around the 420-450 mark.

I feel similar to you about this one. I intend using the capital return to by back the shares I have lost and based on previous experience am fairly hopeful I'll be able to get them back below the consolidation price, thus actually increasing my holding. Not sure we'll see sub 400p, but would not rule it out. I certainly see 400 being more likely than 570 in the short term.

If they can deliver the level of dividend and growth they have predicted then we will eventually see a significant rise in SP. I have my doubts though.

Good luck

Well if there's a leak and people have got wind of an offer and the price has only gone to 23.5p today, then I think we will be very underwhelmed with the terms.

Maybe an RNS tomorrow, but I very much doubt it will contain an offer.

Tacly,

spot on. It's all there in black and white.

Currently Aviva has this £3.75bn sat in the bank. They could do anything with it: leave it where it is, invest it via acquisition of something, or give it back to shareholders.

They've obviously looked around and decided there are no investments offering good enough value, there is no benefits to simply having it sit in the bank, so have decided they may as well return it.

Aviva has this £3.75bn currently but once they have given it away in May they will no longer have it. Clearly the value of the whole will have reduced by the £3.75bn they no longer have.

Many thanks