Shareholders in National Grid (NG.) will have received a notice of a General Meeting to approve a share consolidation (at least that’s those of you on the register of the company, others in nominee accounts may be surprised later by the change in their holding).
This proposal is linked to the return of cash to shareholders following the sale of the company’s interest in a gas distribution business. There will be a large “special” dividend as a result – more on the tax implications of that in a later article.
But the company is also doing a share consolidation which they explain as taking place “in order to ensure that so far as possible, the market price per new ordinary share following the special dividend will be comparable to the price per existing ordinary share prior to the special dividend”. In other words, instead of the share price falling (to reflect the return of capital) and your shares remaining the same in number, the number of shares you hold will be reduced while the share price is maintained.
Who are they trying to fool by this sleight of hand? Do they really think investors are so stupid that they will not realise that the value of their shareholding has been reduced (offset by the dividend received to some extent, if not fully by dividend taxes on private shareholders)?
This consolidation will no doubt incur significant legal and advisory costs on the company, generate unnecessary work for share registrars and stockbrokers, and also create work for investors in adjusting their portfolio records.
I for one will be voting against this consolidation, and I suggest other shareholders may wish to do the same. That would not impede the dividend payment in any way of course.