Shareholders in Telecom Eireann should start receiving their share certificates from today. Posting started yesterday but with 574,000 certificates or statements to send out, it could be some days before all shareholders have received confirmation of ownership.
With their personalised share certificates or nominee account statements, shareholders will get a form which they can use to sell or buy Telecom shares, although some have been dealing on a conditional basis already. A list of the institutions - three banks and eight stockbrokers - that will accept this form to deal for shareholders is set out on the back of the form. These institutions will sell and buy Telecom shares until October 15th, each charging special low commission rates set for dealings in Telecom Eireann shares.
Each institution is offering a different deal, and selling shareholders should check charges to get the most suitable deal. AIB, for example, is charging commission of £7.50 on deals of up to £4,000, but will not allow sellers to nominate a minimum sale price. Dolmen Butler Briscoe has a minimum charge of £25 for deals of up to £3,500 - this price includes the £13 charge for converting from a nominee account to share certificates and the broker will allow clients to nominate a price below which they will not sell.
However, many sellers will find they will not be able to set a minimum price at which they are prepared to sell the shares. One angry caller to The Irish Times said he had asked at an AIB branch in Castlebar about selling shares and was told they would not take an order nominating a minimum selling price. He contended that only large shareholders who were already customers of brokers would be able to nominate their selling prices and therefore get the best deals.
The dealing form does not provide for any price specification by the seller and shareholders holding shares through the nominee account cannot set a minimum sale price. The eight listed institutions will take orders from shareholders, whether the shares are held in certificates or in the nominee accounts. After October 15th, the institutions can change their charges for buying and selling shares, so shareholders should check the charges before they place orders after that date.
Shareholders do not have to use the form to deal. They can bring their share certificates or nominee statements to any stockbroker. The institutions named on the form can take sell orders from clients on the nominee register and pass these orders on to Goodbody Stockbrokers which, as the only broker with access to the nominee register, will execute them. This is similar to earlier flotations, such as the Norwich Union where Davy was the only broker with access to the register. The broker or bank which has taken the sell order will charge the shareholder the agreed special dealing commission. Goodbody will charge this broker a flat service fee of £2.50 and will get the commission from the other side of the deal - the purchase of the shares by its own clients. Where a broker is not on the list, the client will have to convert from the nominee account to share certificates before he can sell through that broker, incurring the £10 stamp duty and £3 administration charge.
Dealers say shareholders can expect profits of between 10 per cent to 20 per cent on the sale of their shares. For example, an investor who applied for £3,000 worth of Telecom shares will have received the full amount sought, or a total of 977 shares. If they sell these shares at, for example, €4.55 (£3.58) they will receive €4,445 (£3,501) before stockbroker charges and stamp duty. The profit, or capital gain, on the sale at €4.55 would be €635 (about £500) before broker charges. That is made up of the price received - €4,445 - less the price paid - 977 shares at €3.90 each or €3,810. There is no stamp duty on the sale of shares and there is unlikely to be a tax liability in this case because each individual can make a capital gain of £1,000 before there is any liability to capital gains tax. However, anyone buying shares will face a stamp duty charge of one per cent on the value of the deal. When investors get their share certificates/nominee statements this week, they must then make a decision on whether to hold or sell their shares. Holding the shares could mean further capital appreciation - the investor bought the shares at €3.90 or £3.07 and they have already risen by about 20 per cent - or the risk of a fall in their value, and, investors who hold the shares for a year will qualify for the bonus of one free share for every 25 shares they hold.
The factors influencing a decision to sell will include the investors assessment of the outlook for the share price and each investor's financial circumstances. For example, investors who have borrowed to buy the shares may wish to repay some or all of their loan, or, an investor could take the view that the share price is unlikely to rise much above current levels.
Some shareholders have told The Irish Times that their brokers are advising them to switch from the nominee account to share certificates. Shareholders should be aware that there are two charges for switching: an administration fee of £3 and a stamp duty charge of £10. In some cases brokers are absorbing those charges in their fees. The advantage of holding a share certificate over a nominee account is that a shareholder who wants to sell could set the price at which he/she is prepared to deal in any order placed with a broker. The disadvantage is that the shareholder must ensure the security of their certificate and this could involve paying fees to a bank or securities company for safekeeping.
One shareholder was concerned that switching from the nominee account to a share certificate could affect his entitlement to the bonus shares at the end of a year.
The switch itself will not affect the entitlement to the bonus shares because the same person will still be beneficially entitled to the shares. However, it is important that the broker involved notifies the Telecom Eireann registrar that the underlying ownership of the shares has not changed - shareholders should seek written confirmation that this has been done from the broker.
