BAYE Firstgroup

blackburn_w

hi,
I haven't got the first clue about shares, but I'm now able to take part in this Buy As You Earn program.
The money comes out my wages pre tax and i can buy shares (well Yorkshire building society) and for every 3 shares i buy the company will give me 2 free.

Is this a worth while thing to do? currently shares are at £1.22 each

bowlhead99

So effectively you pay the price of 3 shares but receive 5 within the share plan administered by YBS. So this is effectively like buying the shares at 3/5ths of the price that everyone else buys them for and there may be a tax break as well from what you say (I'll ignore that below as I don't know the details, but details will be in the company's communications).

You may find there are some vesting terms, so it might be that you can sell the shares you paid for whenever you like, but have to hang on for (e.g.) 3 years to be able to cash out the free ones.

Overall this sounds like a good scheme because even if the company's share price crashed by 40% or so in the next few years, you would still not lose out because you didn't pay for all the shares anyway and you'll presumably be earning some dividends. If instead the company's share price rose by 20% or more, you would be well in the money because you only paid 60p in every pound to acquire the shares in the first place so you've doubled your money.

mark55man

Investors like to have a margin of safety. No one can tell if its a good price but a 40% margin of safety is pretty good.


Only caveat don't have all your eggs in one basket - ie salary pensions and investments all with the same company. if it went up the swannee you would be done in every which way


However if the price went down (which happens) don't panic, regard it as an opportunity to get more, rather than a loss in value of the ones you already have. Your main decision point is when to sell them


In my scheme which is just a 1 for 1 gift, I can sell the bought one and the free one at any time (I pay tax on the benefit implied by the free share). If your scheme has some tax incentives, the chances are you cant sell them, or will incur tax unless you wait 3 years or some such.