Upon receiving news about AIB’s intention to purchase back the stakes from smaller shareholders, I conjectured that my issue might be sorted. It appears, however, that my share is far minute than what they were considering. I was once a happy stakeholder of 100 AIB shares which I procured for over €2,200, optimistically predicting a substantial increase in value over time. Unfortunately, the 2008 financial crisis shattered my dreams. The resulting share consolidation reduced my stake from 100 shares to a single one.
This lone share, in theory, holds a value of around €5, but in practice, it is more of a liability as selling it would cost significantly more than €5. I’m contemplating whether it would be feasible to write off the loss and apply it against a capital gain. My query, though, revolves around whether this would be permissible considering I still technically hold the share.
-Mr P.O’R
This problem encapsulates the predicament faced by a multitude of shareholders across a myriad of businesses. Banks, once the going preference for those investors hunting for dividends, find themselves in the unfortunate position of holding irrelevant stakes in companies where they once anticipated high yields. It’s a common situation across the board.
A notable example involves several original investors of the catastrophic Telecom Éireann flotation, as it was known back then. Throughout its transition to Eircom and ultimately Eir, the company serves as an epitome of the hazards associated with leveraged buyouts and diversion of company resources by shareholders for personal gain. Notorious for its substandard customer service, Eir’s return to its original shareholders was equally disappointing.
After a series of corporate restructures, mergers, and spin-offs, those who held onto their shares now possess stakes in Vodafone worth even less than the initial purchase price. Many are also hold negligible stakes in American telecom company, Verizon, which again, are essentially worthless as selling it off would be uneconomical.
The relocation of CRH’s primary listing to the U.S. isn’t the only cause for worry among minor investors who struggle with international bureaucratic complexities. Similar concerns plague individuals with small stakes in companies like Flutter/Paddy Power, Smurfit Kappa, and possibly Kerry and Glanbia, as they too stand to be affected in the future should these firms decide to go the same route.
Moreover, another challenge for such investors is determining the precise loss on their investments, an essential step to counterbalance any potential capital gains they may accrue this year or in the future. Without realising the loss, otherwise known as crystallising it, it cannot be applied towards offsetting gains elsewhere.
Crystallising a loss is possible in merely three situations— either by selling the shares, officially donating them to a charitable organisation (provided you can find one interested), or when the Revenue formally recognises the shares as worthless, a scenario we’ve experienced in the past with certain de-listed companies, but not with AIB.
For individuals grappling with this predicament, the logical escape route seems to be the low-cost share sale offers, similar to what both AIB and competitor PTSB are fine-tuning currently. Some others like Verizon and Vodafone have previously proposed such solutions for their ageing shareholders.
This issue is widespread. Estimates from the bank reveal approximately 90% of its existing shareholders own no more than 20 shares in the company following a 250-for-one consolidation you mentioned earlier. Together, they merely control around 0.2% of the firm. That’s a significant number of dissatisfied shareholders searching for an exit from their pre-crash investment in what once was an Irish banking giant.
A proposal dubbed the “odd lot” by AIB is up for discussion during its annual general meeting on 2nd May. The plan is to repurchase these non-lucrative shareholdings, sweetening the deal with an added 5% bonus to the bank’s current share price for individuals opting for the offer.
The bank is likely to receive approval at the AGM to deal with the considerable number of inefficient stockholdings that have become costly to maintain, and are a lingering memory of a time the bank wishes to leave behind.
With regards to the buyback, there’s no need for you to worry about being excluded. If you had such a notion, I’m unsure as to why.
It is suggested in the document being sent to shareholders explaining frequently asked questions related to the Odd-lot Offer, that shareholders owning no more than 20 shares of AIB Group plc will have the chance to sell their shares back to the company at a 5% premium to the market price, with no stock broking fees.
It specifies that the limit of 20 or fewer was set as these holdings, given the prevailing share price, would likely be almost wholly consumed by costs if sold via a broker. It seems quite clear that this is a stuck or loss-making holding.
Indeed, as per the bank’s records, the typical shareholding among this 90% of its shareholders is merely 4.36 shares.
So, the “20 or fewer” applies to each shareholder possessing up to that number of shares, you included in holding a single AIB share.
However, there are a few conditions. To begin with, the vote in the AGM only provides the bank with the potential to propose an “odd lot” offer – it doesn’t confirm the offer. If such an offer does occur – potentially later in 2024 – it will necessitate approval from the European Central Bank. Although it’s unlikely to face any obstacles, it’s a necessary step that will put off the actual buying of your share.
The bank has also pointed out that, assuming the “odd lot” offer goes ahead, it will only apply to shareholders with addresses registered in Ireland or the UK. The reason it can’t make the offer to shareholders elsewhere is down to securities regulations.
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