National Grid Rights Issue

wmb194

narries said:

Unlike others, I am not into stocks and shares.  I got my National Grid shares  as British Gas shares back in the 1980's I think (???) .  I have done nothing at all with them all those years. I know they got divided up .

I got a letter this morning. It may as well be written in Dutch as far as I am concerned. I have no idea what I am supposed to do or why.   I dont want to sell my original shares ( which only amounts to some 71 shares anyway apparently).  I just do not get it.

I can see that the time factors are mighty close - one needing to be responded to by 31st May.  I only got the paper lunchtime.  My mother, who recently passed away as kit happens , also has some of these shares - and I am still awaiting probate -  and she hasn't even had a letter yet.  How the hell are you supposed to know what to do or not do? 

If I just do nothing, is that going to leave me without any shares as they take them off me or something?  I am not sure I fancy  shelling out  £129  to buy more shares  as I have no idea what any of them are worth anyway. 

It seems to me they are pulling a fast one here.  I would value being given simple instructions on what is best please. Thank you.

The nature of owning shares in individual companies is that you need to keep on top of the news but as a long term holder of shares in National Grid this shouldn't come as any surprise or anything new as over the decades it's had a few rights issues.

Basically, if you take up the offer to buy new shares at 645p you'll maintain your shareholding and, all things equal, dividends received in the future will be at about the same total amount as you receive now. 

If you don't care about that then let the offer lapse or sell your rights in the market and you'll receive c.£30 (20 * £1.50, the current rights price) in due course as your rights are sold to someone else who will take up the offer. The amount you receive in dividends will be a bit lower than now.

You won't lose your existing shares and the company isn't pulling a fast one.

Chartac

The question has still not been answered is there going to be a two tiered dividend payment?  I have read all the posts and it stands to reason that you will be paid less dividend as you don't own as many shares.  If I take up the offer by tomorrow and buy the 124 on offer will that make my holding of shares 757. 

EthicsGradient

Chartac said:

So my 663 shares will devalue on the dividends paid but if I purchase the 124 shares on offer will I get the higher dividend on all my shares or just the 124? This seems like blackmail by National Grid to force shareholders to cough up.  I have had my shares since British Gas as a former employee on profit sharing scheme and on the split had 3 lots of shares.  Shell pay better dividends. I sold my Centrica

Not sure about your numbers (if you've got 124 nil-paid shares, they would have come from about 426 old shares). But the July 2024 dividend will only be paid for the old shares; from January 2025, all shares will get the same dividend.

Chartac

I have just read another financial page this is the advise 

1. Subscribe for the new shares, or exercise your rights, which means you have to invest more money in the company. If you have 240 existing shares, for example, you have the right to buy 70 new shares at 645p. By buying all your rights for a total price of £451.50, you now have 310 shares and own the same percentage of the company as you did before the rights issue. Part of this is saying they are devaluing the shares I already own or am I missing something? 

2. You can choose to sell some of the shares so you can buy the rest with the proceeds. The number of shares you are able to buy will depend on what price people are willing to pay for the rights you are selling. But you will end up owning a smaller percentage of the total shares than you did before the rights issue. It looks like we are being robbed?

3. You can choose to sell some of the shares so you can buy the rest with the proceeds. The number of shares you are able to buy will depend on what price people are willing to pay for the rights you are selling. But you will end up owning a smaller percentage of the total shares than you did before the rights issue. Does this mean if I do nothing that the 184 shares I am allocated will be sold and I will be paid the £1186.80?  

Still not sure and they haven't given a great deal of time to decide but think I may purchase 67 of the shares to give me a round number of those I own and sell the rest.  Does this seem realistic and would I receive a share cert for the additional shares.? 

I think I am grasping the situation as my understanding is the company are issuing more shares to fund development so my stake is less due to the amount of new shares that have been issued?

I am not a shares person I don't know much about them my shares were given not bought as an employee of BG so kept them and was happy with the dividend, that will be less as I won't hold as many shares in the "new" company

EthicsGradient

Chartac said:

I have just read another financial page this is the advise 

1. Subscribe for the new shares, or exercise your rights, which means you have to invest more money in the company. If you have 240 existing shares, for example, you have the right to buy 70 new shares at 645p. By buying all your rights for a total price of £451.50, you now have 310 shares and own the same percentage of the company as you did before the rights issue. Part of this is saying they are devaluing the shares I already own or am I missing something? 

2. You can choose to sell some of the shares so you can buy the rest with the proceeds. The number of shares you are able to buy will depend on what price people are willing to pay for the rights you are selling. But you will end up owning a smaller percentage of the total shares than you did before the rights issue. It looks like we are being robbed?

3. You can choose to sell some of the shares so you can buy the rest with the proceeds. The number of shares you are able to buy will depend on what price people are willing to pay for the rights you are selling. But you will end up owning a smaller percentage of the total shares than you did before the rights issue. Does this mean if I do nothing that the 184 shares I am allocated will be sold and I will be paid the £1186.80?  

Still not sure and they haven't given a great deal of time to decide but think I may purchase 67 of the shares to give me a round number of those I own and sell the rest.  Does this seem realistic and would I receive a share cert for the additional shares.? 

I think I am grasping the situation as my understanding is the company are issuing more shares to fund development so my stake is less due to the amount of new shares that have been issued?

I am not a shares person I don't know much about them my shares were given not bought as an employee of BG so kept them and was happy with the dividend, that will be less as I won't hold as many shares in the "new" company

Your basic understanding is OK: "the company are issuing more shares to fund development"; if you pay the £6.45 per share for all of the new shares you've been allocated (option 1), then your proportion of the company will be the same (and in the future you'll get the same total dividend as before), but you've had to pay to achieve that.

If you sell some of them, to be able to buy the rest with the proceeds (option 2, which you have to decide to do by 5pm tomorrow, I think), yes, you'll own a smaller percentage, and the dividend you get in the future will be a bit less. 

If you do nothing, they'll sell all the (184?) nil-paid shares for you (around the 12th June). You won't get £1186.80 for them - that's what you would have to pay to convert them into fully-paid shares. You'll get something like the market value they currently trade at - about £1.47 each, so about £270, if the price doesn't move before then. In this case, your total share of the company will be a bit smaller still than option 2, and your future dividends a bit smaller still.

xyz123

Chartac said:

The question has still not been answered is there going to be a two tiered dividend payment?  I have read all the posts and it stands to reason that you will be paid less dividend as you don't own as many shares.  If I take up the offer by tomorrow and buy the 124 on offer will that make my holding of shares 757. 

I dont think its "2 tiered". simply there are more shares in the float so for a given total dividend, the dividend per share will be less than earlier and this is probably the biggest reason for large drop in share price for national grid since the rights issue was announced.

Eddie__2

Being unfamiliar with Rights Issues, I misinterpreted the quoted £2.35 value of a Right as being the price NG would buy them back at, until I received my PAL from II which only offers two boxes to fill in - 1 Do nothing or 2 Buy some or all Rights shares.  The third alternative just says "Sell some or all of your Rights by our deadline date" (5th June). "... share dealing rate will apply".  

It was still not clear that I had to make the trade myself and that the market price of both NG and NGNP (Rights) were plummeting daily. 

So, as I see it, my options are:
1: Find cash to fund my Trading account and buy some Rights Shares subject to CGT on subsequent sales. If you buy Rights shares, the CGT cost is only £6.45. You do not include the cost of obtaining the right, so a CGT gain on a quick re-sale is almost a certainty. 
2 Sell Rights for circa £1.45 and "tail swallow" or do something else.  Bear in mind that unless the sale of Rights is "a Small Distribution", (<£3000 and <5% of the MV of your holding) the gain is subject to CGT in this tax year.  So if you have used your allowance, that is a cost to be included.    

Since the current Rights price is £1.45, exercising my right to buy a share at £6.45 ex-div would effectively cost me £7.90 and the current price is £8.30 (minus the 39p dividend) that option makes a loss. 

Have I got my facts right?  Do any other options some to mind? 

caper7

ignoramus_2 said:

I have only just received info about National Grid Rights Issue this morning 29th May with a deadline of 31st May. This should be illegal!

I only got the paperwork today (30 May)

EthicsGradient

Eddie__2 said:

Being unfamiliar with Rights Issues, I misinterpreted the quoted £2.35 value of a Right as being the price NG would buy them back at, until I received my PAL from II which only offers two boxes to fill in - 1 Do nothing or 2 Buy some or all Rights shares.  The third alternative just says "Sell some or all of your Rights by our deadline date" (5th June). "... share dealing rate will apply".  

It was still not clear that I had to make the trade myself and that the market price of both NG and NGNP (Rights) were plummeting daily. 

So, as I see it, my options are:
1: Find cash to fund my Trading account and buy some Rights Shares subject to CGT on subsequent sales. If you buy Rights shares, the CGT cost is only £6.45. You do not include the cost of obtaining the right, so a CGT gain on a quick re-sale is almost a certainty. 
2 Sell Rights for circa £1.45 and "tail swallow" or do something else.  Bear in mind that unless the sale of Rights is "a Small Distribution", (<£3000 and <5% of the MV of your holding) the gain is subject to CGT in this tax year.  So if you have used your allowance, that is a cost to be included.    

Since the current Rights price is £1.45, exercising my right to buy a share at £6.45 ex-div would effectively cost me £7.90 and the current price is £8.30 (minus the 39p dividend) that option makes a loss. 

Have I got my facts right?  Do any other options some to mind? 

I haven't looked in detail into the CGT position for taking up the rights (since mine are in a SIPP), but I'd be surprised at "You do not include the cost of obtaining the right". Since you would end up with some shares from your old holding, and some from the rights issue, which are then identical, I'd have expected it all to be put in one pool - you add your existing cost, and the cash you spend on converting nil-paid into fully paid, and then divide by the total number you now have to get an average cost per share. With the recent drop in price, it would mean people are less likely to pay any CGT on a sale in the near future than they were before. But maybe there's something strange in the documentation.

 Another poster and I reckon that, at current prices, the "tail swallowing" option does qualify as a "small distribution" - see National grid shares help - Page 3 — MoneySavingExpert Forum , with the amount being about 4.4% of the holding value. If you sold a different proportion than that needed for tail swallowing, it changes, of course (my reading of the "small distribution" rules was "less than £3000 OR less than 5% of value", not "and". But I could be wrong.

The current prices of £1.44 and £8.29 work out as £7.89 and £7.90 respectively, after you've taken the dividend off, so are much of a muchness.

Chartac

EthicsGradient - Thanks for your help I think I'm going to purchase 67 additional shares to give me a round figure so I think I have until 10.06.2024?  Will I get any money back for the shares I do not purchase which will be 117 how much can I expect?