Standard Life shares question
Discussion
Following the sale of their Canadian arm, S.L. are proposing to return £0.73 to shareholders for each ordinary share they hold; that's easy to understand.
At the same time they are also proposing to consolidate the holding
in a ratio of 9 new shares for every 11 shares held and of course maintain
the value of the total shareholding; that's also easy to understand.
But, looking at their website this:
seems to indicate that the value of the total shareholding remains the same only because of the 'extra' £0.73 per share.
Are shareholders not going to be £0.73 per share better off?
What am I misunderstanding?
At the same time they are also proposing to consolidate the holding
in a ratio of 9 new shares for every 11 shares held and of course maintain
the value of the total shareholding; that's also easy to understand.
But, looking at their website this:
seems to indicate that the value of the total shareholding remains the same only because of the 'extra' £0.73 per share.
Are shareholders not going to be £0.73 per share better off?
What am I misunderstanding?
Think of it like this - they are selling off part of the company and giving the proceeds of sale to the shareholders.
In essence,
In essence,
- You start out owning a piece of the company
- You end up with a smaller piece of the company but with the some cash in your pocket as well
- The smaller part + the cash you receive = same place you started.
Claudia Skies said:
Insofar as there is any "better off" element it ought to be in any increase of original share price which the market delivered on the basis of "good news" when the sale was announced. In other words, it's already in the share price.
The share price around the time of the announcement (Sept last year) was around £4.00 (and has stayed around that level until the last few days),so it implies that if they announced that they hadn't sold their Canadian arm, the share price would have dropped by £0.73 at that time
. So in theory one could sell off one's holding now without waiting for a qualifying date and be no worse off!
gregf40 said:
Elderly said:
What am I misunderstanding?
Everything.The benefit shareholders saw was the jump from 380 to 420p in September.
The deal was priced into the share price and completion is just a formality which any new shareholders should not benefit financially from.
Elderly said:
The share price around the time of the announcement (Sept last year) was around £4.00 (and has stayed around that level until the last few days),
so it implies that if they announced that they hadn't sold their Canadian arm, the share price would have dropped by £0.73 at that time.
So in theory one could sell off one's holding now without waiting for a qualifying date and be no worse off!
1. After the deal is announced there shouldn't be any change in the value of what you hold - BECAUSE OF THE DEAL.so it implies that if they announced that they hadn't sold their Canadian arm, the share price would have dropped by £0.73 at that time
. So in theory one could sell off one's holding now without waiting for a qualifying date and be no worse off!
- Imagine a dividend - the share price drops the same value as the dividend on the day the shares go ex-div.
- The day before you had the value of the company + cash in the company coffers.
- The day after you have the value of the company + the cash in your hand.
- They are the same.
2. The move in September implies that a smaller value of the Canadian arm was priced in. The stock went from 386p to 417p (a rise of 31p) on the announcement which implies that the market thought it would be priced at c.42p. Instead it priced at 73p so the stock went up the difference: 31p. (This is wildly simplistic but is essentially what's going on).
If they had announced the deal at 22p not 73p then the stock would have DROPPED 20p (42-22=20) in theory.
3. You can certainly sell now and be no worse off - in theory. Just like you can sell pre-div or post-div and end up with the same money in your pocket.
Elderly said:
Ah .... thank you - it's quite clear now; the jump in share price after the announcement (charted below) is exactly 73p
Where do you see that??You are still a little confused I think.
Unless I am much mistaken, people didn't think Canada was worth ZERO and then get told - hang on chaps - it's worth 73p.
They thought it was worth SOMETHING just much less than 73p.
walm said:
Elderly said:
Ah .... thank you - it's quite clear now; the jump in share price after the announcement (charted below) is exactly 73p
Where do you see that??You are still a little confused I think.
Unless I am much mistaken, people didn't think Canada was worth ZERO and then get told - hang on chaps - it's worth 73p.
They thought it was worth SOMETHING just much less than 73p.
.... did you not spot (or understand) the '
'?ETA I didn't notice your first post.
Edited by Elderly on Monday 23 February 18:36
Elderly said:
gregf40 said:
Elderly said:
What am I misunderstanding?
Everything.The benefit shareholders saw was the jump from 380 to 420p in September.
The deal was priced into the share price and completion is just a formality which any new shareholders should not benefit financially from.
Gassing Station | Finance | Top of Page | What's New | My Stuff