Pref shares and Stan­dard Bank

Finweek English Edition - - Letters - TONY POPE

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.

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