Standard Life Shares

gt94sss2

In the Evening Standard the other day, there was an article called 'Price of Life loyalty is just 12p'

It said that shareholders tempted to take profits now would lose the 1 for 20 loyalty bonus shares due in July but thanks to derivatives etc, there is no need to wait.

This is because you can buy the "right to sell" the shares at 300p in September for 12p, which means you stay on on the share register for the bonus - then worth 15.5p/share. (article was written when Standard Life was 310/11p)

If the price goes down, you protect your profits selling at £3, if it goes up, you let the option lapse (losing the 12p) and sell in the market..

However, I can't find whatever warrant or derivative the author was referring too. Does anyone know?

Regards
Sunil

Yorkshireman_3

gt94sss2 wrote:

In the Evening Standard the other day, there was an article called 'Price of Life loyalty is just 12p'

It said that shareholders tempted to take profits now would lose the 1 for 20 loyalty bonus shares due in July but thanks to derivatives etc, there is no need to wait.

This is because you can buy the "right to sell" the shares at 300p in September for 12p, which means you stay on on the share register for the bonus - then worth 15.5p/share. (article was written when Standard Life was 310/11p)

If the price goes down, you protect your profits selling at £3, if it goes up, you let the option lapse (losing the 12p) and sell in the market..

However, I can't find whatever warrant or derivative the author was referring too. Does anyone know?

Regards
Sunil

Sry but u lost me after 'price for loyalty is just 12p'

im sure someone will explain

ReportInvestor

It's a way of holding to September while limiting the downside to 13p (313p current price minus 300p sale price in September) whatever happens.

If the share price rises or stays above 300p then you just lose the 12p per share cost of those options.

The July bonus (5% of 300p = 15p) will meanwhile cover the cost (and you also remain eligible for the dividend which you would forfeit by selling now).

So I can see the Standard's logic. Such options might be good value for cautious investors. Here are some guidelines (with the proviso that there is no way that Standard shares will remain a steady market in the aftermath of the bonus issue as market makers and institutions test out inexperienced investors).

If the price July-September = 230p you would gain about 58p compared to someone who sold in July after the bonus shares.

If the price July-September = 270p you would gain about 18p compared to someone who sold in July after the bonus shares.

If the price July-September = 310p you would lose 12p compared to someone who sold in July after the bonus shares.

If the price July-September = 350p you would lose 12p compared to someone who sold in July after the bonus shares.

Tempus in the Times reckons its a hold:

".....The good times are unlikely to roll indefinitely and investors, having done so surprisingly well over the past six months, will be tempted to bank profits. A bonus issue of additional shares, due next July, is one reason to remain invested. The latent possibility that Standard will find itself the subject of a takeover bid is another. Hold."

mad

And the fact that they keep going up against a FTSE that has gone down the last two days has to be another good sign. Another year high today of 319.25

http://uk.finance.yahoo.com/q?d=t&p=&q=q&s=SL.L&m=L

Is there a point when it may be worth selling because the chance of a downturn would negate the bonus shares?

hollie.weimeraner

mad wrote:

Is there a point when it may be worth selling because the chance of a downturn would negate the bonus shares?

The chances are that when the bonus shares are issued there will be a fall in the share price anyway that reflects the issue. However, if you can hang on to them and are satisfied they will rise in the long term then consider keeping them. - As the price has now realised £1 per share increase for those that were SL members at the time of the issue I think no matter what you decide to do you end up winning! I for one will be holding the shares until after the bonus issue - just in case there is no price reduction

MarkyMarkD

The bonus shares already exist. They aren't a new issue. They don't represent dilution.

The only reason their allotment may lead to a fall in the share price is because everyone who's been holding on for a year purely for that reason may be tempted to sell. But that's a short-term reason, not a reason for a step change downwards in the share price IMHO.

Selling immediately when you can is almost definitely not going to achieve the best value.

In fact, the cancellation of those bonus shares not required (because people have sold their shares before the year is up) should in fact lead the share price to increase.

Yorkshireman_3

MarkyMarkD wrote:

The bonus shares already exist. They aren't a new issue. They don't represent dilution.

The only reason their allotment may lead to a fall in the share price is because everyone who's been holding on for a year purely for that reason may be tempted to sell. But that's a short-term reason, not a reason for a step change downwards in the share price IMHO.

Selling immediately when you can is almost definitely not going to achieve the best value.

In fact, the cancellation of those bonus shares not required (because people have sold their shares before the year is up) should in fact lead the share price to increase.

Nice one Mark -- I guess the nxt milestone is £3.50?? Im still convinced that a great number of people realise these shares are a good medium to long term investment. So think even those selling on the issue of bonus shares will only have a short term effect if any on the value.

multimillionaire

bonus & then I'm holding personally......riding this baby out!

Yorkshireman_3

multimillionaire wrote:

bonus & then I'm holding personally......riding this baby out!

ME TOO

catz1ct

Just found this thread.... sorry if this has already been said but as long as you keep your shares until July you will get the bonus issue.

If you transfer them or sell them you wont get them. Simple.