company share scheme/rights issue

k-hkr

Hi,

I work for Centrica and have shares within the two company schemes. Does anyone know what the position would be with the recently announced rights issue?
Specifically, I have 3 SAYE 3 yr schemes running. With these I don`t actually have the shares but just the option to purchase shares at the discounted rate once the 3 yrs are up. Would the rights issue take account of these `options` or totally disregard them. (I assume with the influx of shares onto the market the share price will drop somewhat, hence when we actually get these options we would have lost out alot unless we could get the rights issue shares to offset this loss).

I also have the 5 yr scheme running where I buy £125 a month and are given 1 for every 2 shares bought. These are actually bought each month so I do have these shares, although they are held in the scheme for 5 yrs to be tax free. I am assuming that I will only be offered the rights issue against these shares held in the 5 yr scheme, and even then I am not sure about the `matching` shares (the free ones)??

Then can I sell any of these extra rights issue shares straight away as they are bought against shares tied up in the company scheme, not from shares held in certificate form??

Can anyone who is savvy with these things advise? I haven`t even had any forms through yet that explain it all/ let me apply and from what I can make out it has to be done by next Friday!!

Cheers.

DRS1

I am not sure you need to do anything about the 3 year SAYE scheme. The number of shares under option and the exercise price per share will be adjusted to reflect the rights issue. It is a slightly complicated calculation designed to compensate for the drop in value of a share caused by the rights issue. You end up paying the same total price for the shares but may get a few more of them.

For the 5 year plan I think you ought to get some bit of paper giving you a choice of what to do about the rights issue. As I recall (I haven't done this for some time) the most popular course was called tail swallowing which meant selling enough rights shares to get some shares effectively for nothing. Of course that was when rights issue shares had some value and things may be different these days (eg B&B's rights issue).

k-hkr

They did mention this tail swallowing in the email we all got but I did not understand it. From what we were told we have the option of 3 shares for every 8 owned at a price of 160p. So for example if I have 2000 shares and can therefore buy 750 rights issue shares at 160, how does the tail swallowing bit work??
Also, can I sell some or all of these shares straight away ??(I would be using holiday money to buy them so cannot do this if I have to hold them for any time).

cheers

k-hkr

Can anyone help me out here?

cheers

djglover

With tail swallowing, they sell the shares on the open market, eg for £2.00, and give you the difference eg 40p for each share that you could have bought, so if you hold 8000 and tail swallow, in the above scenario, you would get £1200 worth of extra shares, but the value of your existing shares would likley devalue by a similar amount.

Not sure how it affects me yet as I have Shares, SIPS, 3 & 5 years SAYE.

Adamia

I'm in the same boat.

Opinions/advice would be greatly recieved.

Blah99

I wrote a whole long reply then the forum lost it :mad:

In summary, I would take up. But don't listen to me, because I don't have a clue what I'm talking about.