Capital Gains Tax & confusion over share value

ConfusedCF

Hi,
My Mum and I are sorting through some old paperwork. We have found a number of long-forgotten paper share certificates in her name, which were purchased around September - December 2009. The total number of shares is several hundred thousand.
I have 2 questions:
If we decide to sell them, how do we work out the Capital Gains Tax due if we don't know the exact purchase price for them all? Out of maybe 7 ceritificates issues, only 3 have the Contract Note from the bank attached showing the exact price purchased.
Secondly, the ones that do show the purchase price, show the share value as being between 3 to 4 pence. However, when looking at the company history online (Sterling Energy Plc), the share value at that time was around £1.30 (an example date of purchase is 14.08.2009). How would that be possible?
I am very new to all this and it is quite a learning curve, so apologies if I am missing something obvious!
Thank you for reading, any advice is appreciated.

Mysterz

If you google “ cgt on death uk” then the Money Advice Service link gives you some info on this. 

ConfusedCF

Mysterz said:

If you google “ cgt on death uk” then the Money Advice Service link gives you some info on this. 

Sorry, I was unclear. My father was the finance person in the household and he arranged for my Mum to buy the shares. They're in her name, not his and therefore not related to any death taxes etc. The reason we found them now is because we're going through my Father's other paperwork. We're just trying to get all her affairs in order to simplify her estate for the future.
Have edited my original post.
Thanks!

Linton

I am afraid your father made a very poor choice when picking his investments . 

From some quick research: At its height in 2006 Sterling Energy reached £10.  Now it's down to 10p.  However if you tried to sell all the shares I think you may have difficulty finding someone to buy them. The company seems to have around 10 (11-50 according to LinkedIn) employees and has been loss making for at least 5 years.

One consolation  - I dont think you will have a CGT problem

ConfusedCF

Linton said:

I am afraid your father made a very poor choice when picking his investments . 

From some quick research: At its height in 2006 Sterling Energy reached £10.  Now it's down to 10p.  However if you tried to sell all the shares I think you may have difficulty finding someone to buy them. The company seems to have around 10 (11-50 according to LinkedIn) employees and has been loss making for at least 5 years.

One consolation  - I dont think you will have a CGT problem

Thanks for your opinion there regarding my Father's choices. Luckily he also made some very smart choices too, so any loss here isn't really an issue.

However, as I mentioned, my confusion was regarding how the shares were purchased for a price of between 3 and 4 pence in August 2009, when the historical share price shows as being around £1.30 then 

EthicsGradient

If you're absolutely certain the contract notes work out at 3 to 4 pence per share (check all the sums, and if you still have them, check bank statements from the time to see what came out of a current account if that's revelant, or any account history with the broker), then check the class and face value of the share certificates you have, and what is currently listed as "the" Sterling Energy" (or whatever) share, and check they are the same. And search the internet for news about share issues. For instance, https://www.investegate.co.uk/article.aspx?id=200912220711445329E says, for December 2009, "Sterling announced a share issue to raise up to £20.4 million (net of expenses) through the issue of up to 1,637,296,583 New Ordinary Shares by way of a Firm Placing and Open Offer at a price of 1.3 pence per New Ordinary Share ... A share consolidation is being proposed pursuant to which, following the completion of the Capital Raising, save for Admission, and prior to Admission on 23 December 2009, all of the then issued shares in the capital of the Company, including the New Ordinary Shares, will be consolidated into Ordinary Shares on a 1 for 40 basis. ".

It's going to get complicated. An online share history like https://www.londonstockexchange.com/stock/SEY/sterling-energy-plc/company-page?lang=en (which does show a price around 130p in late 2009) will show the movement after such consolidations have been taken into account. I suppose the "good news" is that, for that particular share, it looks likely there's a loss involved, which can be used to offset gains in others. The LSE page also shows shares in the company are still trading - about 70,000 shares a day in the last couple of days.

Linton

ConfusedCF said:

Linton said:

I am afraid your father made a very poor choice when picking his investments . 

From some quick research: At its height in 2006 Sterling Energy reached £10.  Now it's down to 10p.  However if you tried to sell all the shares I think you may have difficulty finding someone to buy them. The company seems to have around 10 (11-50 according to LinkedIn) employees and has been loss making for at least 5 years.

One consolation  - I dont think you will have a CGT problem

Thanks for your opinion there regarding my Father's choices. Luckily he also made some very smart choices too, so any loss here isn't really an issue.

However, as I mentioned, my confusion was regarding how the shares were purchased for a price of between 3 and 4 pence in August 2009, when the historical share price shows as being around £1.30 then 

According to  Google, price in 2006 was around £10, not £1.30.

By any chance was your father a director or employee of Sterling Energy?  The company's annual reports refer to Stock Options being available for a few pence.

See: https://find-and-update.company-information.service.gov.uk/company/01757721/filing-history 2006 annual report , page 24.  Perhaps it may be worthwhile looking at previous years.

bowlhead99

ConfusedCF said:

Linton said:

I am afraid your father made a very poor choice when picking his investments . 

From some quick research: At its height in 2006 Sterling Energy reached £10.  Now it's down to 10p.  However if you tried to sell all the shares I think you may have difficulty finding someone to buy them. The company seems to have around 10 (11-50 according to LinkedIn) employees and has been loss making for at least 5 years.

One consolation  - I dont think you will have a CGT problem

Thanks for your opinion there regarding my Father's choices. Luckily he also made some very smart choices too, so any loss here isn't really an issue.

However, as I mentioned, my confusion was regarding how the shares were purchased for a price of between 3 and 4 pence in August 2009, when the historical share price shows as being around £1.30 then 

The historical price showing on a chart has been rebased for the fact that the old shares on your father's contract notes (ordinary shares with a nominal value of 1p each) which had a market price of 3 or 4p in 2009 were consolidated by the company on a 40-to-1 basis basis so that after the consolidation, instead of having billions of them in issue they had only a couple of hundred million shares in issue with a nominal value of 40p each.

So an old market price of 3p or 4p paid for the old shares would correspond to a price of 120p or 160p for the new versions, but owning a lot fewer of them. A chart would be meaningless if there was a huge spike in it at the consolidation so most data providers will just reflect the prorata price of the current versions of the shares. Though others may not. In other words it is those 'new' consolidated shares which have trended down in price from £1.20-1.30 levels over the years and are now about 10-12p each (i.e. losing 90% of their value).  He had already lost a lot of the value in 2009 as they raised more money from investors in an August/September placing at about 1.3p each (compared to his 3-4p payment price), before they did the consolidation.

 When your father looks after his own share certificates rather than having them held electronically with a broker, he wouldn't automatically get new certificates sent to his house because it is far too much hassle for the company to send out new certificates en masse. So if your father had 100,000 '1p' shares he would now only have 2500 '40p' shares that were trading in the market at 120p, instead of lots more shares trading at 3p each.  The normal 'current' ordinary shares have a nominal value of 40p each, and so you should be cautious if you are thinking that all of your hundreds of thousands of shares are worth 10-12p each, because actually you need 40 old 'early 2009' shares which might have cost you £1.20 back in the day to get 10-12p of sale proceeds now, because they really did lose 90% of their value.  The company registrar could confirm the position if you are holding old certificates or if you just give them to a broker to sell, they will find out what they are worth in 'current' terms if you are holding funny old denominations.

Sterling website has a prospectus describing the 1 for 40 consolidation (123320 Sterling Energy Intro.qxp (squarespace.com) and likewise an RNS mentions it Investegate |Sterling Energy PLC Announcements | Sterling Energy PLC: Result of Open Offer

A share consolidation is being proposed pursuant to which, following the completion of the Capital Raising, save for Admission, and prior to Admission on 23 December 2009, all of the then issued shares in the capital of the Company, including the New Ordinary Shares, will be consolidated into Ordinary Shares on a 1 for 40 basis. 

Linton

Brilliant Bowlhead.  For future reference how did you come across this?  I only looked at the earlier annual reports.
So 100,000 old shares turned into 2500 new shares now worth 10p or so which gives the OP £250  minus charges were anyone to want them.

ConfusedCF

EthicsGradient said:

For instance, https://www.investegate.co.uk/article.aspx?id=200912220711445329E says, for December 2009, "Sterling announced a share issue to raise up to £20.4 million (net of expenses) through the issue of up to 1,637,296,583 New Ordinary Shares by way of a Firm Placing and Open Offer at a price of 1.3 pence per New Ordinary Share ... A share consolidation is being proposed pursuant to which, following the completion of the Capital Raising, save for Admission, and prior to Admission on 23 December 2009, all of the then issued shares in the capital of the Company, including the New Ordinary Shares, will be consolidated into Ordinary Shares on a 1 for 40 basis. ".

Ahh, thank you @EthicsGradient , that makes sense. Thank you for taking the time to look into that, it is greatly appreciated

ConfusedCF

@bowlhead99 Thank you for such a brilliantly informative response. That's exactly it, thank you! That was beginning to fry my brain but you have made it make perfect sense. As for the loss, ah well, it is what it is. Like everyone said, at least there's no Capital Gains now Thank you again for your knowledge & help, it is greatly appreciated.

bowlhead99 said:

The historical price showing on a chart has been rebased for the fact that the old shares on your father's contract notes (ordinary shares with a nominal value of 1p each) which had a market price of 3 or 4p in 2009 were consolidated by the company on a 40-to-1 basis basis so that after the consolidation, instead of having billions of them in issue they had only a couple of hundred million shares in issue with a nominal value of 40p each.

So an old market price of 3p or 4p paid for the old shares would correspond to a price of 120p or 160p for the new versions, but owning a lot fewer of them. A chart would be meaningless if there was a huge spike in it at the consolidation so most data providers will just reflect the prorata price of the current versions of the shares. Though others may not. In other words it is those 'new' consolidated shares which have trended down in price from £1.20-1.30 levels over the years and are now about 10-12p each (i.e. losing 90% of their value).  He had already lost a lot of the value in 2009 as they raised more money from investors in an August/September placing at about 1.3p each (compared to his 3-4p payment price), before they did the consolidation.

 When your father looks after his own share certificates rather than having them held electronically with a broker, he wouldn't automatically get new certificates sent to his house because it is far too much hassle for the company to send out new certificates en masse. So if your father had 100,000 '1p' shares he would now only have 2500 '40p' shares that were trading in the market at 120p, instead of lots more shares trading at 3p each.  The normal 'current' ordinary shares have a nominal value of 40p each, and so you should be cautious if you are thinking that all of your hundreds of thousands of shares are worth 10-12p each, because actually you need 40 old 'early 2009' shares which might have cost you £1.20 back in the day to get 10-12p of sale proceeds now, because they really did lose 90% of their value.