Pref shares and Standard Bank
THE DECLINE IN VALUE of pref shares was largely brought about by the issuers of the shares themselves, in particular, Standard Bank.
At the end of May 2006, Standard Bank issued a new tranche of pref shares at R114, at the existing rate of 70% of prime. This was below the market price of R116,00 at the time of the announcement, which obviously drove the existing price down to the new issue price. Six months later, Standard Bank issued another tranche of pref shares, at the same rate (70% of prime) for R100, thereby wiping out 12% of the capital of shareholders who bought in May 2006. Obviously, the existing prices dropped to as low as R100,00.
Pref share holders don’t have a vote, so they are open to abuse, I guess.
It would be interesting to get Standard Bank’s rationale for destroying its (pref) shareholders’ value.