My wife and I both purchased shares in the Telecom Éireann flotation and, while we both sold some of these soon afterwards, we did retain some of the original flotation shareholding. I cannot recall how many shares we held onto, but whatever number it was, it became 459 Vodafone shares each by the beginning of this year.
During the recent Vodafone/Verizon transaction we both elected to receive the Vodafone return of value as the capital option, to sell the 12 Verizon shares we were entitled to each and to hold onto the resultant consolidated Vodafone shares. We now hold 250 Vodafone shares each.
Luckily we have a capital gain arising in relation to a different matter and I wish to offset the Vodafone loss against the other gain in a CGT return. I assume at this stage that there is a known loss per share and was hoping you might advise me what the loss is. Mr CK, email
As we come to the close of the year, the ghost of the disastrous exercise in popular capitalism that was the flotation of Telecom Éireann returns to haunt us.
To recap:
in July 1999, Telecom Éireann floated at €3.90 a share.
a year later, the company issued one loyalty share for every 25 original shares held to the first anniversary of flotation.
in early 2001, the company sold
Eircell
, its mobile arm to Vodafone in an all-share deal. Essentially, for every two original shares held, you got 0.9478 of a Vodafone share.
in November 2001, Sir Anthony O’Reilly’s Valentia consortium bought the rest of the company in a cash deal.
in July 2006, Vodafone had a share consolidation, issuing seven new shares for every eight shares previously held plus a cash payment of 15p sterling for every share previously held.
in 2013/14, the Verizon deal and ‘return of value’ meant shareholders got a cash payment, Verizon shares which they could choose to hold or sell immediately and six new Vodafone shares for every 11 shares previously held. You can see where there would be grounds for confusion.
If you hold 250 shares now, you did, as you note yourself, have 459 before the Verizon deal.
Before the 2006 consolidation, your shareholding would have been 525 Vodafone shares; that means you would have had 996 Eircom shares before the original sale to Valentia. Stripping out the 38 bonus shares you would have received, it seems you held on to 958 shares in Telecom between you after selling someafter the flotation, (unless I've got my maths wrong, which is always possible).
Working forwards again, the Valentia deal paid €1.335 per share but Revenue has determined that the “base cost” of that part of the business was €1.69, meaning you are still nursing a loss of 35.5 cent per share – or €340.09 on your 958 shares.
Obviously the Valentia payment of €50.73 for your 38 bonus shares is a profit but it is well below the €1,270 annual exemption from capital gains.
In the 2006 Vodafone share consolidation, your 15p per share cash payment amounted to £78.75 for your 5,252 shares then held, or €117 at the prevailing foreign exchange rates. Again, that would be a capital gain but well below your exemption threshold for that year.
So now we get to the Verizon deal and the return of value. In relation to the cash payout and the Verizon shares, Revenue has determined that your loss on these two separate events is 72.1 cent for every share held before the exercise started – ie 459 in your case. So that’s a loss of €330.94 to add to the loss of €340.09 dating back to the Valentia deal. So your total crystallised loss to date is €671.03.
For what it is worth, with Vodafone stock trading at around 225.6p (287.78 cent), you should be aware that Revenue has determined the base cost of your remaining Vodafone shares at €4.58. That means you could incur further losses if you sell this remaining shareholding.
Finally, bear in mind that you are supposed to settle any capital gains due by December 15th (for gains made in the first 11 months of the year) and by January 30th, 2015 for gains made this month.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin2 or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
