RBS Rights Issue - what happens if shares are in ISA?

John_Gray

If someone has an ISA consisting of RBS shares, will they be allowed to purchase more shares if RBS goes ahead with the rumoured rights issue? I'm wondering whether this could come into the category of investing more than the maximum allowable....

Thanks!

earlgrey_3

That's when ISAs can become bit of a pain. You can't pay money in above the usual allowances. You can use spare cash within your ISA or sell off shares to release funds to take up the rights, or the third option is to sell the rights and the receipts for that should be retained within the ISA.

Yet another way available as from this year would be to transfer money from a cash ISA to the shares ISA.

dzug

It ought to be possible to take up the rights issue and hold the resulting shares outside the ISA.

But it will depend on the fine print and how your ISA provider works.

John_Gray

It will be a wait-and-see for the information from the ISA provider, then!

Steve__K_7

Could you sell the rights applicable to ISA holdings to yourself to purchase the extra shares outside of the ISA? Or to your spouse?

In investing in the extra shares you are protecting your future dividend payments which otherwise would drop from say approx 7% yield to approx 5% otherwise.

Rough calc based on: Same divi payments (you would hope unless future really bleak) shared across more shares at a rate of (18+11)/18 = 29/18 = approx 3/2. So yield is 2/3 of the yield on your pre-rights issue investment.

Can't say I've much sympathy for RBS shareholders, as they did vote for the takeovers of American Banks & then ABN. Fred's first gamble, NatWest, paid off, his subsequent ones have failed. Like all gamblers one takes on bigger & bigger risk until you lose! Paying mostly cash for ABN indicates lack of risk awareness. Compare that to the Barclays more measured approach of mostly shares and walk away rather pay too much.

earlgrey_3

Steve__K wrote: »

In investing in the extra shares you are protecting your future dividend payments which otherwise would drop from say approx 7% yield to approx 5% otherwise.

RBS statement:
"The Board believes that it would be prudent to pay the 2008 interim dividend in shares."