The results will be good as updates throughout the year have been as expected. Exceptional leader with a great team of staff. The business is so transparent and repeatable. Hedged revenue, superior cost control , ahead of the Industry on ESG with innovative financial options. Grossly undervalued SP. Once in a lifetime yield/ investment opportunity. PI’s take the dividend. Ii’s or those wishing to sell take the offer and get out. This business isn’t complicated. It’s easy . Rinse and repeat acquiring cheap assets , smart asset management and cleaning up the mess others can’t/don’t want to do. Right Business at the Right Time. Keep going Rusty.
My understanding is that the optionality of this tender offer is that you receive the dividend amount as capital cash back providing you sell the nominated amount of shares back to the company at a 5% premium? Hence the total cash received is the dividend plus the proceeds of your sale of shares. Otherwise it does not make financial sense.
Also from the regulatory new: Following consultation with shareholders and after careful consideration of the feedback received, the Company is offering shareholders optionality as to the Return of Capital. "Are there large holders looking at a way to goose buybacks"?
Since I bought my shares on the New York exchange it seems like I will not be able to participate. Is the company trying to increase the amount of trading in the U.S. compared to London or are they just stuck with the current buyback scheme?
Jim, might be the scheme has to be from the primary exchange and that the (current) secondary exchange isn't (yet) liquid enough to justify the cost and complexity of arranging the scheme across both jurisdictions.
I think the offer as written makes zero sense. I am sure it will be made clear in the circular. For now it looks like I will sell shares to "receive" my dividend. It should be I receive my dividend and the company is offering to buy up to $$ of my shares. The ex dividend should only be a means of triggering shareholders to be asked if they want to participate.
"This Return of Capital allows shareholders to be paid the same total amount of the previously declared Third Quarter Dividend while providing optionality for shareholders to receive that payment in the form of a cash dividend payment or a cash payment as consideration for the sale of their Shares in the Tender Offer."
As a long term holder, the tender is too much complication for too little gain given an unknown tender price. What is reasonably certain is that the price will drop by the amount of the dividend on ex day and probably a bit more in the following days. The most profitable trade is likely to be a sale one day prior to ex-day coupled with a purchase 3+- trading days after ex-day as long as one sells shares for a gain to avoid the (US) wash sale rule.
Is your mini spreadsheet correct? Taking the first column you have 93 shares worth £837, 7 shares tendered for 66.15 but the dividend would be (93*87.5cents)/1.255 (todays exchange rate) which is 64.8 rather than 5.9?
It seems the risk is all about the share price (the increased nav is irrelevant as it seems to have zero impact on share price) and how that goes up to the tender date. If you buy shares now then come 1st march they will drop by 87.5 cents as they go,ex dividend. It’s whether they recover enough to make the tender worthwhile or not.
Hi Ian, you're right, and I used a 1.27 FX rate. Have updated the article.
To your other point, the NAV is irrelevant, but NAV/share isn't, since a tender results in fewer shares ergo NAV/share increases. My addition of "tipping points" provides a good insight as to how under different share price scenarios the number of shares surrendered in a tender reduces as share price increases. We will have to see if ex-dividend causes a drop, this quarter, and if that remains through March, especially since the Year End report arrives shortly before the vital 5 days prior to the average share price which matters (for the tender)
Totally confused. I purchased sometime ago at circa -£15. I think I am with OB in why would I not take the dividend. My thinking here is as long as we survive at some point soon I will have all my original investment back out and playing with house money. Am I missing something?
It all depends on the share price of the buybacks if you do the tender. If its above £13.80 your making more than the dividend as you will be paid the share price plus 5% (69p approx 87.5 cents).
So rusty must think the results are going to be good enough to send the price to £13.80 or shareholder are worse off.
Yes - this is my understanding - although with 30% WHT (e.g. in ISA) the breakeven is around 960p which makes more sense. If you hold in a SIPP and your pension provider has their act together then you should not be paying WHT.
Checked my ISA and looks like I get WHT down to 15% on US stocks by signing a W8EN - hopefully this applies here too. Does seem like the key question here is about the tax rate / wrapper - if getting any discount on the 30% rate then it doesn’t make sense to tender unless the stock price goes up considerably.
You failed to mention the full year results will be released around the 19th March.
This is going to have a massive impact on share price as it will mention the recommended dividend. So unless you think the rresults are going to be crap your better off with the tender regardless of the share price you bought in at.
The results will be good as updates throughout the year have been as expected. Exceptional leader with a great team of staff. The business is so transparent and repeatable. Hedged revenue, superior cost control , ahead of the Industry on ESG with innovative financial options. Grossly undervalued SP. Once in a lifetime yield/ investment opportunity. PI’s take the dividend. Ii’s or those wishing to sell take the offer and get out. This business isn’t complicated. It’s easy . Rinse and repeat acquiring cheap assets , smart asset management and cleaning up the mess others can’t/don’t want to do. Right Business at the Right Time. Keep going Rusty.
In the increased share price example, should it be 5 not 7 shares tendered?
Hi Damofarl, absolutely - have now corrected it to the correct maths.
My understanding is that the optionality of this tender offer is that you receive the dividend amount as capital cash back providing you sell the nominated amount of shares back to the company at a 5% premium? Hence the total cash received is the dividend plus the proceeds of your sale of shares. Otherwise it does not make financial sense.
I expect you are correct.
Also from the regulatory new: Following consultation with shareholders and after careful consideration of the feedback received, the Company is offering shareholders optionality as to the Return of Capital. "Are there large holders looking at a way to goose buybacks"?
Since I bought my shares on the New York exchange it seems like I will not be able to participate. Is the company trying to increase the amount of trading in the U.S. compared to London or are they just stuck with the current buyback scheme?
Jim, might be the scheme has to be from the primary exchange and that the (current) secondary exchange isn't (yet) liquid enough to justify the cost and complexity of arranging the scheme across both jurisdictions.
I think the offer as written makes zero sense. I am sure it will be made clear in the circular. For now it looks like I will sell shares to "receive" my dividend. It should be I receive my dividend and the company is offering to buy up to $$ of my shares. The ex dividend should only be a means of triggering shareholders to be asked if they want to participate.
"This Return of Capital allows shareholders to be paid the same total amount of the previously declared Third Quarter Dividend while providing optionality for shareholders to receive that payment in the form of a cash dividend payment or a cash payment as consideration for the sale of their Shares in the Tender Offer."
I've Just had the message from IG to advise if I want to tender or take the dividend.
Do you have further thoughts since writing the article?
I wrote a dec-ent offer#2 article which is worth a read but taking the dividend makes the most sense for most people
Thanks for pointing that out. Appreciated!
I hold in an ISA so going to keep them and enjoy the ride.
As always, I appreciate your posts on DEC.
As a long term holder, the tender is too much complication for too little gain given an unknown tender price. What is reasonably certain is that the price will drop by the amount of the dividend on ex day and probably a bit more in the following days. The most profitable trade is likely to be a sale one day prior to ex-day coupled with a purchase 3+- trading days after ex-day as long as one sells shares for a gain to avoid the (US) wash sale rule.
Is your mini spreadsheet correct? Taking the first column you have 93 shares worth £837, 7 shares tendered for 66.15 but the dividend would be (93*87.5cents)/1.255 (todays exchange rate) which is 64.8 rather than 5.9?
It seems the risk is all about the share price (the increased nav is irrelevant as it seems to have zero impact on share price) and how that goes up to the tender date. If you buy shares now then come 1st march they will drop by 87.5 cents as they go,ex dividend. It’s whether they recover enough to make the tender worthwhile or not.
Hi Ian, you're right, and I used a 1.27 FX rate. Have updated the article.
To your other point, the NAV is irrelevant, but NAV/share isn't, since a tender results in fewer shares ergo NAV/share increases. My addition of "tipping points" provides a good insight as to how under different share price scenarios the number of shares surrendered in a tender reduces as share price increases. We will have to see if ex-dividend causes a drop, this quarter, and if that remains through March, especially since the Year End report arrives shortly before the vital 5 days prior to the average share price which matters (for the tender)
Totally confused. I purchased sometime ago at circa -£15. I think I am with OB in why would I not take the dividend. My thinking here is as long as we survive at some point soon I will have all my original investment back out and playing with house money. Am I missing something?
It all depends on the share price of the buybacks if you do the tender. If its above £13.80 your making more than the dividend as you will be paid the share price plus 5% (69p approx 87.5 cents).
So rusty must think the results are going to be good enough to send the price to £13.80 or shareholder are worse off.
Yes - this is my understanding - although with 30% WHT (e.g. in ISA) the breakeven is around 960p which makes more sense. If you hold in a SIPP and your pension provider has their act together then you should not be paying WHT.
Checked my ISA and looks like I get WHT down to 15% on US stocks by signing a W8EN - hopefully this applies here too. Does seem like the key question here is about the tax rate / wrapper - if getting any discount on the 30% rate then it doesn’t make sense to tender unless the stock price goes up considerably.
You failed to mention the full year results will be released around the 19th March.
This is going to have a massive impact on share price as it will mention the recommended dividend. So unless you think the rresults are going to be crap your better off with the tender regardless of the share price you bought in at.