Tesco illegal shares rip off?

Crazydave88

Tesco's new dividend payment due this month and issue of new shares will rip off every household.
Example of someone owning 20000 shares.
A 50.93p dividend  is to be given for each share held, then once the dividend has been paid, Tesco will re-issue only each shareholder only 15 shares per 19 held.
The dividend will be taxable, even if you use the dividend to buy new shares. So for example. you own 20000 shares, worth £484000, dividend payable £10186.00. Tesco then re issue 15 shares for every 19 shares held, so now you have 15789 shares (assuming the same £2.42p share price) worth £38209.32.  You will pay tax @ 7.5% on part of the dividend payment, as the first £2000.00 is free of tax, which equals -£613.95.
So you then use the dividend amount (less tax paid) to purchase more shares which you will get 3955 new shares, so add this to your re-allocated shares and you will have a total of 19784 shares, 216 less than what you started with prior to this so called dividend payment. How can this be legal....

Voyager2002

How will this rip off "every household"? Many of us do not own Tesco shares.

[Deleted User]

Hi,

will it affect my Clubcard points?

eskbanker

Crazydave88 said:

Tesco illegal shares rip off?

[...]
How can this be legal....

Which law do you believe is being broken?

Voyager2002

[Deleted User] said:

Hi,

will it affect my Clubcard points?

No. Not at all.

nyermen

Voyager2002 said:

[Deleted User] said:

Hi,

will it affect my Clubcard points?

No. Not at all.

I think it was tongue in cheek

Share "buybacks" often focus on the assumption that while there are less at the end, the value of the company hasn't changed, and so the will increase in price.  But not sure what tesco are up to here, maybe something different.

wackojackouk

Just stumbled across this in the past few days.

I knew Tesco were potentially selling off but didn't know about the consolidation part and the divided tax.

I am a Tesco shareholder as I inherited some shares when my late mother passed away a few years ago.

I have approximately 8800 shares which was for a rainy day/new car/towards our new house purchase (hopefully going through this month).

If I am correct, I'll receive around £4500 in a Dividend (set to reinvest in shares) and my shares will be consolidated to about 6900 new shares. They do this to stop the share price dropping so I'm told.

Anyhow, as I am a higher tax rate payer (just about), I believe the first £2000 is tax free (from OP) but I'm then liable to pay 32.5% tax on the remaining divided of £2500 which is approximately £800+

I thought we might actually make some money on this but it looks like costing me money. Not sure it's a rip off but doesn't seem very fair.

Any tips? - Could I transfer some shares into my partners name who is a non-taxpayer before the 12th February to avoid such a hit?

Thanks
WJUK

molerat

As usual thread title containing illegal and rip off nothing of the sort.

Many companies do this on a regular basis.  You simply own less shares, worth more each, from a lower total amount of shares which in theory should give you a higher dividend per share so the same total dividend amount.  Consider yourself lucky that you are getting a dividend at all this year unlike many.

HansOndabush

Tesco are paying out cash from selling their Asian business and for some reason think it necessary to maintain the share price at around its current level by way of a slight consolidation. Overall you don't gain or lose anything over just selling pre-div and pre-consolidation. No rip off and certainly nothing that is not legal though as commented on another thread, the consolidation is a waste of time and money; who cares if the share price is lower if you are compensated with a cash dividend?

Thrugelmir

A very apt title to a thread on this very topic yesterday. 

https://forums.moneysavingexpert.com/discussion/6237010/can-anyone-explain-the-tesco-share-deal-to-a-numpty#latest

Who owns £50k of Tesco stock?  

jimjames

wackojackouk said:

I thought we might actually make some money on this but it looks like costing me money. Not sure it's a rip off but doesn't seem very fair.

Any tips? - Could I transfer some shares into my partners name who is a non-taxpayer before the 12th February to avoid such a hit?

I don't know what the effective/ex dividend date is for this but you might want to check. I suspect it may have already passed.
But it really highlights the benefit of holding shares inside an ISA as no tax is payable inside the wrapper. If they're not already in an ISA it might be worth doing that especially if you can do so before the ex div date

By the way this activity will have absolutely no effect on our household and we will not be ripped off so the OP is very wrong with their claim