Analysts say Coronation Fund’s scheme to buy back stock from smaller shareholders is punitive as they will also have to shoulder dividend withholding tax under the company’s odd-lot offer announced this week.
Coronation said this week it had decided to proceed with the odd-lot offer to ordinary shareholders that hold less than 100 ordinary shares as well as to those holding more but equal to or less than 500 shares.
It said the scheme would provide the odd-lot holders and specific holders “with an opportunity to realise the value of their investment without incurring dealing charges which might otherwise make it impractical” to sell their holdings.
However, in a correction to the initial odd-lot offer terms yesterday, Coronation said there were a total of 3 287 specific holders on the company’s share register, comprising 18% of the total number of shareholders in the company.
Additionally, the total number of shares held by the specific holders comprised of 971 621 shares, represented 0.28% of its issued shares.
The total number of shares held by the odd-lot holders and specific holders comprises of 1 054 970 shares representing 0.30% of the total issued shares of the Coronation.
On social media yesterday market watchers said that the odd-lot holders “will be compromised” under the scheme.
The “odd-lot offer consideration constitutes a dividend. Coronation will take small shareholders’ shares at a cost of dividend withholding tax” to those shareholders, said one analyst.
Coronation, however, said that based on the maximum number of shares being repurchased under the odd-lot offers, the financial impact on its books would be a reduction of its cash resources of R36.1 billion, inclusive of estimated expenses amounting to R588 300.
It also said it would suffer a reduction in its total equity by R36.1bn.
Some market observers commented that Coronation’s odd-lot offer was “punitive” compared to a normal repurchase scheme.
“The Coronation odd-lot offer is a dividend, so for individual shareholders they would then be taxed DWT on the full amount regardless of what they paid for the shares. Surely this is punitive,” said the Finance Ghost (@FinanceGhost) on social media platform, X.
Coronation said the offer price for both the odd-lot and the specific offer schemes would be at a premium of 10% to the 30-day volume-weighted average price of its shares.
Shares in Coronation slumped by a marginal 0.35% in yesterday’s trade session to R31.02. The company has R602bn in assets under management as at the end of September 2023, representing a 5% year on year increase.
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