Tesco illegal shares rip off?

[Deleted User]

jimpwarsop said:

Thanks, I'll be shifting them in good time.  My concern was that it might be earlier.

Hi,

shifting them, where?

If you have a tax concern sounds as though you have too many for a S&S Isa.

jimjames

wackojackouk said:

jimjames said:

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

Thanks buddy, I think you're correct in that they should really have been inside an ISA wrapper and I haven't done that as had a lot going on. Will probably be best solution going forward.

Judging by the timeline in the previous post you may still have time to sell and rebuy inside your ISA if you haven't yet used your allowance

Crazydave88

moneysavinghero said:

You own 20,000 shares worth £48,400.
The special dividend will pay you £10,186.
You will pay tax of £613.95
You will then own 15,789 shares worth £48,400
So you have actually made £9572.05, not a rip off at all.
You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will increase in price so that they are worth the same as before.

Your statement is incorrect, the consolidation of re issuing less shares would mean your reduced holding of15789 shares at £2.42 would be worth £38209.00, not £48400.00

Crazydave88

Totally incorrect statement on the amounts.. £600.00 tax?? more like 10 times plus.

uknick

Crazydave88 said:

moneysavinghero said:

You own 20,000 shares worth £48,400.
The special dividend will pay you £10,186.
You will pay tax of £613.95
You will then own 15,789 shares worth £48,400
So you have actually made £9572.05, not a rip off at all.
You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will increase in price so that they are worth the same as before.

Your statement is incorrect, the consolidation of re issuing less shares would mean your reduced holding of15789 shares at £2.42 would be worth £38209.00, not £48400.00

I was going to question this when he posted, but I think he's asserting the share price will go up to about £3.06 to compensate for the reduction in the number of shares in issue.

uknick

Crazydave88 said:

Totally incorrect statement on the amounts.. £600.00 tax?? more like 10 times plus.

Not sure where you get 10 times from.  The dividend received of £10,186 has tax applied to £8,186 of it at 7.5% assuming basic rate tax payer giving the £613 in income tax.  If you've already used up your £2k dividend allowance then you get taxed for £764.  Or, tax is £3,310 or £3,880 if higher or additional rate tax payer.

eskbanker

uknick said:

Crazydave88 said:

Totally incorrect statement on the amounts.. £600.00 tax?? more like 10 times plus.

Not sure where you get 10 times from.  The dividend received of £10,186 has tax applied to £8,186 of it at 7.5% assuming basic rate tax payer giving the £613 in income tax.  If you've already used up your £2k dividend allowance then you get taxed for £764.  Or, tax is £3,310 or £3,880 if higher or additional rate tax payer.

Not only that, but OP seems to have forgotten that he himself used the same calculation of dividend tax in the opening post!

Crazydave88 said:

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.

TheAble

Thrugelmir said:

Who owns £50k of Tesco stock?  

Not sure why that's a big deal, I'd happily own 50k of Tesco stock.

uknick

uknick said:

Crazydave88 said:

moneysavinghero said:

You own 20,000 shares worth £48,400.
The special dividend will pay you £10,186.
You will pay tax of £613.95
You will then own 15,789 shares worth £48,400
So you have actually made £9572.05, not a rip off at all.
You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will increase in price so that they are worth the same as before.

Your statement is incorrect, the consolidation of re issuing less shares would mean your reduced holding of15789 shares at £2.42 would be worth £38209.00, not £48400.00

I was going to question this when he posted, but I think he's asserting the share price will go up to about £3.06 to compensate for the reduction in the number of shares in issue.

The shares have now been restructured and my holding value has dropped by 15/19, give or take, as the share price is currently about £2.42, the value used in the Tesco corporate restructuring document.  When I get the dividend in a couple of weeks this will roughly balance the drop in share holding value with the one off payment.  But, are we likely to see the share value increase to £3.07 as moneysavinghero suggested to get my holding value back to what it was? 

underground99

uknick said:

uknick said:

Crazydave88 said:

moneysavinghero said:

You own 20,000 shares worth £48,400.
The special dividend will pay you £10,186.
You will pay tax of £613.95
You will then own 15,789 shares worth £48,400
So you have actually made £9572.05, not a rip off at all.
You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will increase in price so that they are worth the same as before.

Your statement is incorrect, the consolidation of re issuing less shares would mean your reduced holding of15789 shares at £2.42 would be worth £38209.00, not £48400.00

I was going to question this when he posted, but I think he's asserting the share price will go up to about £3.06 to compensate for the reduction in the number of shares in issue.

The shares have now been restructured and my holding value has dropped by 15/19, give or take, as the share price is currently about £2.42, the value used in the Tesco corporate restructuring document.  When I get the dividend in a couple of weeks this will roughly balance the drop in share holding value with the one off payment.  But, are we likely to see the share value increase to £3.07 as moneysavinghero suggested to get my holding value back to what it was? 

No, because as several people pointed out, his logic was flawed. They are not making free money out of nothing. The company took £5bn out of its own bank account and is in the process of putting it into the individual bank accounts of its own shareholders. The sum of all the shares in the company is therefore worth £5bn less than it used to be, because the company has £5bn fewer assets; the cash is now going to be directly owned by the shareholders, instead of the shareholders owning a company that has an overly fat bank account.

If you take 20% of the value out of the company in cash, and put that cash in your back pocket, you can't then magically expect your share of the company (after its bank account suddenly got £5bn lighter) to still be worth exactly the same amount of money as it was the day before, when the company had £5bn more assets.

The company gave you it's cash the £5bn out of its own bank account and put it into the pockets of the shareholders including yourself. The shareholders now have cash, but the value of all their shares in the company, collectively, has dropped by the £5bn.  Over the last month, the share price has bobbled around somewhere between 240-245p, and that was the sort of number the shareholders were familiar with. But if you took £5bn out of the company, each share of the company which was previously worth about 242p would drop in value by about 4/19ths, to be worth about 192 instead of 242p, while the investors had 50p in their pocket.

To keep things simple for the shareholders 'keeping score' by glancing at familiar numbers on a share price ticker, they have decided to rip up 4/19ths of everyone's share certificates. When they did that, each of the shares still in issue (and not ripped up) become more valuable because they each represent a larger fraction of the company than they did the day before; within every 19 shares, 4 of the old shares are in the bin and no longer useable or voteable without any dividend rights, while the 15 remaining are still good.  The 'still good' ones represent a bigger share of the company than those 15 did when there were more total shares in issue. So while an 'old' share would have fallen to be worth ~190p, the good shares that you now own have immediately bounced back up to 240p.

Bottom line is, you had a pile of shares worth £x, now you have a pile of shares worth 'y' and a pending dividend receipt worth 'z', which together will be worth about the same '£x'.  Meanwhile to help you sense check whether the company is doing well or doing badly, they have rebased the number of shares so the shares are still changing hands at about 240-245p, despite the company being smaller  (due to having £5bn less cash).