DOMINIC COYLEanswers readers' questions about personal finance...
Why some shareholders are treated differently
Q: I am the holder of Bank of Ireland ADR shares for the last 30 months. I have watched these shares fall to a tenth of their value when I purchased them. I have accepted the vagaries of the stock market and Bank of Ireland’s poor business decisions that resulted in this loss.
I have recently watched these shares halve in value again because of the bank’s decision to more than double the amount of shares in the bank. Again, I was prepared to accept this on the understanding that I would be able to buy these shares at a discounted price. However, I have been informed by the bank that, as an ADR shareholder, I will not be eligible to buy these discounted shares.
I am extremely angry to find that my rights as a shareholder are to be ignored simply because I hold my shares on the New York Stock Exchange. Why are all shareholders not being treated equally in this rights issue?
– Mr B S, e-mail
A
It must be annoying in the extreme to find yourself frozen out from the prospect of retaining your existing stake in the bank after all that has gone on in the past couple of years – not least with the share price.
However, the bank is perfectly within its rights to determine where it sells the shares. There are particular issues with selling the shares in the US as fairly onerous and costly paperwork would have to be filed under the US Securities Act 1933.
Given the relatively small number of US-based shareholders, it has clearly decided not to go this route. It is not unique in this. Several companies across Europe have previously excluded ADR holders from rights issues.
Ironically, while you are not allowed to take up your rights, you are allowed to sell them. It does seem somewhat inconsistent but selling the rights will at least allow you recoup some of the money you might have hoped to make on an investment in the rights issue itself.
If you do want to sell the rights, you will need to contact BNY, the group through which people looking to buy ADRs in Bank of Ireland on the US market operate. I wouldn’t hang around though. As I understand it, selling your rights in this way is possible only until the close of business tomorrow.
Are Prize Bonds a safe investment?
Q: How safe is it to invest in Prize Bonds and is there any scenario whereby the Prize Bond Co Ltd could become insolvent?
– Mr J C, Dublin
A
Prize bonds, like An Post savings, are a Government guaranteed investment. That makes them as safe as any investment available to you. While your money will not earn any interest during this time, you are free to cash in the bonds whenever you want at face value. Once you buy the bonds, they are included in each of the regular draws.
As the Prize Bond Company is backed by the State I cannot see a situation where it will become insolvent. It would require the company itself to become insolvent – and there is no sign of that happening – and the State behind it to go broke which, even in current times, is far fetched.
This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail:dcoyle@irishtimes.com
