Standard Life - 73p Cash Payment But .......

Hal17

May I ask a more basic question. Am I correct in thinking that if I choose Option B and complete the form - the payment received will be treated as Capital Gains and therefore my wife and I would not be liable to tax - no other Capital Gains taken.

But if we took Option C - this would be paid as Dividends and we could be liable for tax.

Appreciate any help.

Ops sorry - would have helped if I read the Q & A sheet closer - think that answers my question.

IronWolf

The share consolidation is irrelevant, your shares will be worth the same in aggregate whether the consolidation occurs or not, they are only doing it so that the price of individual shares is consistent over time.

If you are surprised and unhappy that the price of shares will decline by the appropriate amount when the payout is made then you don't really have any business buying shares in the first place.

babyj3

killerkev wrote: »

But there is a gain for example if you hold say 500 shares worth x amount say £2500 these will be replaced with 409 new shares worth around £2500 depending on the share price at the time of conversion (normal market conditions) plus you get a payout of £365 in your pocket to do what you want with, a nice little bonus
Hold more shares and get a larger payout

If you look at their example your 500 shares worth £2007.50 would become 409 shares worth £1642.14 and they'd give you £365 in cash
Add £365 to £1642.14 = £2007.50
500 - 409 = 91
91 shares at the quotes £4.015 = £365
They are selling your own shares to pay you your own money back- Smoke and mirrors!
Plus less shares means less future dividend as you now have less shares to be paid on so you are worse off in that respect
I don't want my shareholding to be decreased in order to get my own money back at a time of record low interest rates but that's what they are forcing me to do
This is not what I voted for in September 2014 and their letter made no mention of it either. The regulating authorities should be looking at this very closely and I for one will be complaining to whoever it is possible to complain to
I am voting against their proposal

molerat

IronWolf wrote: »

The share consolidation is irrelevant, your shares will be worth the same in aggregate whether the consolidation occurs or not, they are only doing it so that the price of individual shares is consistent over time.

If you are surprised and unhappy that the price of shares will decline by the appropriate amount when the payout is made then you don't really have any business buying shares in the first place.

The share holding will only be worth 9/11ths of the current value, the remaining 2/11ths being paid out in cash or as new shares. The whole selling point to vote in favour of the scheme was that investors would gain something playing on the special dividend previously paid. There was no mention that you would be in the same financial position. If the truth was made clear the vote from ordinary investors may not have gone in their favour.

Nowhere did they say
We are selling the Canadian business for £2.2bn and we will return £1.9bn of this to shareholders at 73p per share by reducing the value of your holding through a share consolidation.

babyj3

molerat wrote: »

The first mention I can see of the share consolidation is January. It was originally sold to investors on the basis of an issue of new shares which could be kept or sold. It may well have been buried deep in the pages of the prospectus but certainly was not on the bullet points.

You are right
I voted based on what I was told in their letter of September 2014 as did most other shareholders.In summary it stated that of the £2.2 billion sale £1.75 billion or around .73p per share would be returned to shareholders. We got the previous special dividend in cash and this letter was worded in such a way as to make me believe that this was to be the same arrangement
This would gave left a .45 Billion in the company
Nothing is being returned to shareholders other than our own money
Yes the share price has improved but all share prices go up and down
and always will
The point here is what shareholders were told when voting in September 2014 and I believe that I was mislead and that what is happening/proposed now is not what I was told or what I voted for

IronWolf

molerat wrote: »

The share holding will only be worth 9/11ths of the current value, the remaining 2/11ths being paid out in cash or as new shares. The whole selling point to vote in favour of the scheme was that investors would gain something playing on the special dividend previously paid. There was no mention that you would be in the same financial position. If the truth was made clear the vote from ordinary investors may not have gone in their favour.

Nowhere did they say
We are selling the Canadian business for £2.2bn and we will return £1.9bn of this to shareholders at 73p per share by reducing the value of your holding through a share consolidation.

They are not reducing the value of your holding through consolidation, they are reducing the value by returning capital to shareholders. The consolidation is irrelevant. You were always going to see a decline in the value of your holdings by the payout amount. If you didn't understand this then you really shouldn't be investing in individual shares in the first place. Sorry to be blunt, but while this mistake hasn't cost you money you could quite easily make a much bigger error.

babyj3

IronWolf wrote: »

The share consolidation is irrelevant, your shares will be worth the same in aggregate whether the consolidation occurs or not, they are only doing it so that the price of individual shares is consistent over time.

If you are surprised and unhappy that the price of shares will decline by the appropriate amount when the payout is made then you don't really have any business buying shares in the first place.[/QUOTe
Standard life state that the share price should be approx the same immediately before and after the share consolidation.
My HOLDING in shares will decline when they pay me out my own money - something that I do not want - under the guise of Capital Return and consolidation - something that I did not vote for
Shares go up and down depending on many issues so we can only hope for consistency
The issues here is that they have mislead shareholders who voted in good faith and now find out that Standard Life are selling our own shares and giving us back our own money and not the Capital Return they promised in September 2014

molerat

IronWolf wrote: »

They are not reducing the value of your holding through consolidation, they are reducing the value by returning capital to shareholders. The consolidation is irrelevant. You were always going to see a decline in the value of your holdings by the payout amount. If you didn't understand this then you really shouldn't be investing in individual shares in the first place. Sorry to be blunt, but while this mistake hasn't cost you money you could quite easily make a much bigger error.

It is not so much a case of what they have done rather than how they have done it and what they told investors at vote time playing up a previous "windfall" payout which had little or no effect on share price. It is yet to be seen what effect this will have on future dividends but the next dividend payout, which is in line with expectations per old share, will be reduced to 82% of that expected as it will be paid on a smaller shareholding.

bowlhead99

babyj3 wrote: »

I couldn't agree with you more
I like you only voted for the sale to go through to get the Capiltal return of 73p per share.There was no mention when asked to vote in Sept 14 of share consolidation. Why? It seems to me that they wanted to dangle the carrot of a special dividend so that shareholders would vote for the sale to go through and we did almost unanimously. If they had told shareholders that they wanted to sell the Canadian business to fund a share consolidation

Why does the share consolidation matter so much to you and why are you getting so hung up over it. Do you actually care whether you have 500 shares or 409 shares. Of course not, none of us do, the number of shares on your certificate is neither here nor there. The share consolidation and restructure is just a mechanism to allow them to give shareholders the spare money out of the company's bank account without everyone having to pay tax as if it was a dividend.

What you and everybody else are voting on next, if you read what you are voting for, is them returning money back to investors after selling a part of their business. They had announced that if they sold that part of the business they would want to give the money from selling that part of the business back to the shareholders, because it would be pointless holding 4 billion canadian dollars in their bank account, as they wouldn't know what to spend it on. But what they were pretty certain of, was that the shareholders would rather they had 4 billion canadian dollars instead of a canadian insurance, investment managment, savings and retirement business, so they had arranged the sale.

You and all the other investors voted wholeheartedly to dispose of Canadian operations with the longer term intention of returning the spare funds to shareholders.

Next, you will very likely pass the forthcoming vote and say sure, go ahead, lets restructure the company a little bit and give us back all the spare cash you're not using. And yes we're happy with the tweaks you're making to the company constitution to accommodate the share restructure in the most tax efficient way so we can all optimise our personal tax position.

I doubt the vote would have been so decisive or even gone through. Who knows?

It was quite clear what the vote is for, if you read what the vote is for.

They did not sell part of the company to allow a share consolidation. They sold part of the company to generate a large amount of cash from a buyer which would have otherwise remained untapped - they wanted $4bn more than they wanted the Canadian business. The value to the shareholders of Standard Life having $4bn of spare cash in it was higher than the value to the shareholders of having Standard Life own a Canadian insurance retirement and investment management business.

Then once they sold the business, they want to perform a share restructure to allow the money to go back to the shareholders in the most effective way possible without everyone paying a huge amount of tax. They asked you to vote on that just now because they can't just rip up the constitution and restructure it themselves without a vote from the owners of the business.

As the owners of the business, as a whole, are not stupid, they will say sure, that's a fine idea, let's restructure the company so we can take the money out in a tax efficient way, and then let's take the money out, because there is no point having these billions in the bank account when we don't need it and interest rates are low.

So, the proposed restructure of the shares is not the reason to sell the canadian company. Selling the canadian company and having way more cash than they need which their shareholders would want to receive in their own bank accounts, is the reason they want to restructure the shares. They have cash and want to give it to you.

I foresee a real backlash from unhappy shareholders who feel mislead to say the least

I don't think there will be one. What is there to complain about? People liked the idea of the sale of Canada, generating cash and focusing the business. Following the sale, would you prefer the company to just sit there with money doing nothing in the bank when interest rates are low? Why would you want an investment in a company which does nothing with its assets? You wouldn't, so you presumably voted in 2014 for the Canadian business to be sold with the expectation that the money generated would be returned to its investors, of which you were one.

Even now Standard Life haven't given shareholders the chance to vote separately on these issues

The issues are

ISSUE 1) Shall we sell the Canadian business if we can get a good price for it? Answer from the directors, yes. That operational decision was made a year or more ago. If you are a shareholder who votes at the annual meetings you would have voted to appoint or reappoint the directors who in turn recruit a management team who in turn employ 6000 staff to run the business. You do not need to vote on every issue.

But Canada was a decent sized chunk of the business so they still let you have a vote on whether to sell to get the $4bn from the buyer, and told you at the time of the vote that if you agreed to go ahead they would return the spare 73p per share to you in cash. You and the other shareholders voted 99.66% in favour of going ahead.

ISSUE 2) If we have a lot of money in the bank from this sale shall we return it to shareholders or shall we keep it lying uselessly in the bank? Answer, we plan to return it, and we kinda covered that already when discussing the plans ahead of the first vote. However, we will go out to a shareholder vote for approval of the method.

ISSUE 3) If we are returning cash to shareholders the best thing to do would be to restructure the share capital to allow it to be done tax efficiently using a B/C share scheme rather than pay out taxable dividends to everyone. We plan to do this. However we will go out to a shareholder vote. While doing this, we can also ask the investors to fill out a form whether they want to get their money back as income or capital or both, as most will be able to choose, depending on where in the world they live. We will ask the investors what they prefer.

So, Issue 1 was resolved ages ago. There was no point doing 2 & 3 until the industry regulators had given approval. Now they have, we might as well do point 2 & 3 as one exercise. Documents issued 20 February, meeting coming up for the vote on 13 March.

However, the shareholders just the one vote

Only one vote was needed, back in September/October last year, to cover issue 1. Then there is another one coming up in March to cover issues 2 & 3. There are about 4 paragraphs and they relate to making the distribution. Returning the value to the shareholders so that the cash sits in the hands of the shareholders and not idly redundant in a company bank account doing nothing useful.

and their letter still talks about a return of value to shareholders when in fact there is no return of value of 73p per share as stated in their letter.

You own a piece of a company which has several pounds of value in it for every share you own. At least 73p of that value is cash sitting idly in a bank account.

They propose to return that value to you in cash so that you can have it in your hands. At that point, the company will have less value in it, because it no longer has the equivalent of 73p cash per share sitting in a bank account, because it has paid out 73p cash to all the shareholders for every share they hold.

There is a return of value of 73p a share.

The share price has nothing to do with what was offered to shareholders in return for their vote. I am pleased it is doing well but that has nothing to do with what Standard Life led me to believe I would receive if I voted for the Canadian sale

The share price is driven entirely by perceptions of what the company is worth - what it has in the bank, what assets it has, what its profits are, what it will do in the future. As the company has made some positive decisions, including the sale of a business and a proposed return of funds to investors, the share price has done quite well.

The company held a vote on the disposal ; holders of over a billion shares bothered to vote. 99.66% of those people voted for the proposal. What did you believe you were voting for, if not the sale of the canadian business which would generate cash to eventually be returned to shareholders?

As for cakes - I could have bought my own piece of cake with my windfall and I haven't even ended up with one crumb

Perhaps my cake analogy in which I explained how a cake can grow over time but if you have it in your belly you can no longer also have it on your plate, was lost on you.

I'll try again. You voted for the cake to get bigger by siding with the directors to make the positive move of disposing of the Canadian business and therefore improving the overall value of Standard Life in terms of its total assets or cash or business prospects or all three.

The cake, [or shall we call it the apple tree?] was small. The cake, or apple tree, grew as a result of the directors lining up a sale: a big cash buyer turning up with [cake ingredients / fertiliser] and the stockmarket loving the prospects. You as the owner 'voted for' the idea of accepting the ingredients or fertiliser so that after the growth was delivered you would be able to take the spoils away and eat them. The heat turns on in the oven, the sun comes out in the sky, and thanks to the ingredients or the fertiliser we get growth. As a result of the growth, the cake is bulging, the apple tree is bulging.

On the tree, there is now a lot of low hanging fruit. Then if the wind is right, and everyone votes in March, you can take a 'wind fall', as the fruit falls into your lap. Lovely. But the fruit is no longer in the tree. If you let it off the tree into your lap you cannot still have a bulging tree with lots of low hanging fruit that you can sell to someone else for lots of money. I suppose you can vote against taking the wind fall. But most of your fellow owners will vote for it, so now you will pretty much get it whether you like it or not. If you don't want the fruit, you can plant it again and grow new trees.

Are you still following the analogy? Good.

What you seem to be saying now is that you feel misled. If you had known that it was only possible to take a wind fall by having the apples come off your tree and into your hand, you would not have wanted the wind fall, because there's no point just having them in your hand instead of on the tree. You're not hungry, leave them for later. Am I hearing you correctly?

But you are also saying that you feel so strongly about this problem: the problem that you can't have apples in your hand at the same time as they are on the tree, or you can't have your cake on a plate and have eaten it too, that if you had known that this is how the world works, you would never have voted last October to approve the ingredients for the cake, the fertiliser for the tree. You feel you were bribed into approving the fertiliser by the promise of being able to grow some apples to eat. Now you realise that if you take the apples into your hand you cannot still have them in the tree, you wish you had never even grown the apples in the first place.

So Scenario 1, you have a tree that doesn't produce apples.

Scenario 2 you have a tree with apples which you can sell for more than you could sell the tree in Scenario 1, but if you don't sell it or eat the apples, the apples will eventually go rotten and the tree will lose value.

Scenario 3 you have a tree with apples that you take off and eat, but then you no longer have a tree laden with apples that you had in Scenario 2.

You seem to be saying that you prefer Scenario 1 to either 2 or 3. You would prefer to vote last October for no apples to be created, than end up with an apple-laden tree and have to face a vote this March on whether to take the apples off it.

The big fuss was to make us think we would get a nice windfall while Sir Gerry and his helpers were thinking up this smoke and mirrors exercise. I wonder if they got nice big bonuses ?

They asked you whether you would like to grow apples and take the windfall. I expect Sir Gerry and his helpers got a bonus for arranging the fertiliser that allowed the apples to grow, because they have created some value for you. You now have a tree full of apples while before you had a bare tree.

You think it is all smoke and mirrors because you can't take the apples off the tree while still leaving the apples on the tree. That is not smoke and mirrors it is how the world works. To decide you don't like how the world works and if you'd known how the world works you would not have wanted Sir Gerry and the helpers to nurture the tree and grow the apples in the first place, seems like you are not thinking clearly.

If there is a shareholder group who brings up a complaint I will be joining them and I hope the national newspapers pick up on the story and show how Standard Life has treated it's shareholders

They created some value and tried to give it to you in your hands. Everyone else likes it - 99.66% approved. However you think that most of them, representing a billion individual shares held, probably don't understand it and should have rejected creating that value.

If you reject it, you will be cutting off your nose to spite your face. You would come across as one loaf short of a picnic. Unfortunately this piece is lengthy enough as it is, and if you are unable to grasp the concepts about having your cake and eating it or having a tree full of apples vs taking a wind fall, I do not want to confuse you with further metaphors about the human body or countryside dining.

babyj3

IronWolf wrote: »

They are not reducing the value of your holding through consolidation, they are reducing the value by returning capital to shareholders. The consolidation is irrelevant. You were always going to see a decline in the value of your holdings by the payout amount. If you didn't understand this then you really shouldn't be investing in individual shares in the first place. Sorry to be blunt, but while this mistake hasn't cost you money you could quite easily make a much bigger error.

You are the one who has it wrong
The consolidation is not irrelevant and it seems to me that it is a smoke and mirrors exercise designed to let the unwary think they are getting the promised windfall
Standard Life are using the consolidation to reduce the value of my shareholding and then return capital to me - something that I do not want especially at a time of low interest rates. I feel I would do better if my money was left in their shares and getting the dividend twice yearly
I want the status quo
If I have less shares it means that my future dividend will be lower as the dividend payments are based on the number of shares held. So I lose out there as well
I want my shareholding to be left as it stands. I do not want nor need the return of capital
Standard Life never told me that I was going to see a decline in my holdings if I received a payout. They lead me to believe I would receive a windfall payment in the form of a special dividend as previously paid and a lot of people must have believed the same to vote as they did.
I feel as if I am a turkey who ended up voting for Christmas