Schroders PLC (SDR)

[monabri]

Schroders info.

https://www.schroders.com/en/investor-r ... are-price/

226m

https://www.schroders.com/en/investor-r ... are-price/

56.5m

[KnightOfSpring]

I know SDRC and SDR prices are moving around a bit but is it correct that the discount SDRC is now at is broadly "fair" given the extra shares the voting shares will receive? ie the market thinks that this is more or less a done deal. I think it is, but would appreciate a second opinion. Just before posting this, I see the discount has widened to about 19.8%. SDR holders will get an extra 17.6% shares, so this discount doesn't seem unusual given lack of complete certainty, timing etc.

Seeing as there are currently 282,500,000 shares of each class in issue (total of 565,000,000) the overall dilution across both classes will be half the 17.6% dilution caused by the new voting shares, so around 8.8%. As I said before, all things being equal you would expect the dividend to be reduced by this amount unless a larger dividend payment is made to allow for this dilution.

All the best, Si

Si is looking at a different Annual Report from me. The 2021 Report tells me that issued and fully paid there are 226 million voting shares and 56.5 million non voting shares, a total of 282,500,000.

Dod

I was a bit surprised that there was the same amount-perhaps the equal figures were of shares that could be issued and many of the non voting ones hadn't yet been issued (I understood the NV class were mainly used to incentivise staff with bonus shares and that they will be looking to incentivise staff in the future with new NV shares)? I understood the large discount was for 1. institutions don't like a lack of voting rights 2. that they are horribly illiquid for an institution to try and do anything meaningful. If both had the same amount of shares in issue then I would have thought liquidity in the NV wouldn't be much of an issue.

Anyway assuming Dod's figures are correct, does that mean nearly 40m new shares will be issued and there will be a dilution in the order of 14.1%?

[monabri]

14.1% was what I calculated as well.

Edit...Dod's "figures" are Schroders'

[Dod101]

I know SDRC and SDR prices are moving around a bit but is it correct that the discount SDRC is now at is broadly "fair" given the extra shares the voting shares will receive? ie the market thinks that this is more or less a done deal. I think it is, but would appreciate a second opinion. Just before posting this, I see the discount has widened to about 19.8%. SDR holders will get an extra 17.6% shares, so this discount doesn't seem unusual given lack of complete certainty, timing etc.

Seeing as there are currently 282,500,000 shares of each class in issue (total of 565,000,000) the overall dilution across both classes will be half the 17.6% dilution caused by the new voting shares, so around 8.8%. As I said before, all things being equal you would expect the dividend to be reduced by this amount unless a larger dividend payment is made to allow for this dilution.

All the best, Si

Si is looking at a different Annual Report from me. The 2021 Report tells me that issued and fully paid there are 226 million voting shares and 56.5 million non voting shares, a total of 282,500,000.

Dod

I was a bit surprised that there was the same amount-perhaps the equal figures were of shares that could be issued and many of the non voting ones hadn't yet been issued (I understood the NV class were mainly used to incentivise staff with bonus shares and that they will be looking to incentivise staff in the future with new NV shares)? I understood the large discount was for 1. institutions don't like a lack of voting rights 2. that they are horribly illiquid for an institution to try and do anything meaningful. If both had the same amount of shares in issue then I would have thought liquidity in the NV wouldn't be much of an issue.

Anyway assuming Dod's figures are correct, does that mean nearly 40m new shares will be issued and there will be a dilution in the order of 14.1%?

That seems to me to be about right. 3 for 17 gives a new issue of 39,8872,352 which as you say is 14.1% of the current shares in issue.

Agreement all round

Dod

[Dod101]

14.1% was what I calculated as well.

Edit...Dod's "figures" are Schroders'

Absolutely. I always go to the horse's mouth. Third party sources are often inaccurate.

Dod

[KnightOfSpring]

14.1% was what I calculated as well.

That's good to know you goty the same figure. Taking the last price I looked at SDRC 2450p and SDR 2924p it looks like there is a 16.2% discount currently for the NV shares. Pretty narrow and would look to indicate this is more or less a formality (unless the chances of improved terms for NV shareholders (in less bonus voting shares being issued) are cancelling out the chances that nothing will happen). Suspect there will be nothing to see here and it will all go through smoothly.

[simoan]

I know SDRC and SDR prices are moving around a bit but is it correct that the discount SDRC is now at is broadly "fair" given the extra shares the voting shares will receive? ie the market thinks that this is more or less a done deal. I think it is, but would appreciate a second opinion. Just before posting this, I see the discount has widened to about 19.8%. SDR holders will get an extra 17.6% shares, so this discount doesn't seem unusual given lack of complete certainty, timing etc.

Seeing as there are currently 282,500,000 shares of each class in issue (total of 565,000,000) the overall dilution across both classes will be half the 17.6% dilution caused by the new voting shares, so around 8.8%. As I said before, all things being equal you would expect the dividend to be reduced by this amount unless a larger dividend payment is made to allow for this dilution.

All the best, Si

Si is looking at a different Annual Report from me. The 2021 Report tells me that issued and fully paid there are 226 million voting shares and 56.5 million non voting shares, a total of 282,500,000.

Dod

I was a bit surprised that there was the same amount-perhaps the equal figures were of shares that could be issued and many of the non voting ones hadn't yet been issued (I understood the NV class were mainly used to incentivise staff with bonus shares and that they will be looking to incentivise staff in the future with new NV shares)? I understood the large discount was for 1. institutions don't like a lack of voting rights 2. that they are horribly illiquid for an institution to try and do anything meaningful. If both had the same amount of shares in issue then I would have thought liquidity in the NV wouldn't be much of an issue.

Anyway assuming Dod's figures are correct, does that mean nearly 40m new shares will be issued and there will be a dilution in the order of 14.1%?

That seems to me to be about right. 3 for 17 gives a new issue of 39,8872,352 which as you say is 14.1% of the current shares in issue.

Agreement all round

Dod

Apologies for the bad numbers sourced from Stockopedia. I should have taken time to download the AR but then what do I pay £200 a year for? I concur 14.1% is the dilution involved, so difficult not to see the dividend taking a hit.

All the best, Si

[KnightOfSpring]

I know SDRC and SDR prices are moving around a bit but is it correct that the discount SDRC is now at is broadly "fair" given the extra shares the voting shares will receive? ie the market thinks that this is more or less a done deal. I think it is, but would appreciate a second opinion. Just before posting this, I see the discount has widened to about 19.8%. SDR holders will get an extra 17.6% shares, so this discount doesn't seem unusual given lack of complete certainty, timing etc.

Seeing as there are currently 282,500,000 shares of each class in issue (total of 565,000,000) the overall dilution across both classes will be half the 17.6% dilution caused by the new voting shares, so around 8.8%. As I said before, all things being equal you would expect the dividend to be reduced by this amount unless a larger dividend payment is made to allow for this dilution.

All the best, Si

Si is looking at a different Annual Report from me. The 2021 Report tells me that issued and fully paid there are 226 million voting shares and 56.5 million non voting shares, a total of 282,500,000.

Dod

Sorry if the numbers are incorrect, I should've referenced the AR. It seems my source of share count numbers (Stockopedia) is completely wrong in showing 282,500,000 for both classes of share. In fact it is the total in issue across both classes.

All the best, Si

No harm done Si and it did generate an answer that was accurate unlike my initial sloppy thinking.

[simoan]

I know SDRC and SDR prices are moving around a bit but is it correct that the discount SDRC is now at is broadly "fair" given the extra shares the voting shares will receive? ie the market thinks that this is more or less a done deal. I think it is, but would appreciate a second opinion. Just before posting this, I see the discount has widened to about 19.8%. SDR holders will get an extra 17.6% shares, so this discount doesn't seem unusual given lack of complete certainty, timing etc.

Seeing as there are currently 282,500,000 shares of each class in issue (total of 565,000,000) the overall dilution across both classes will be half the 17.6% dilution caused by the new voting shares, so around 8.8%. As I said before, all things being equal you would expect the dividend to be reduced by this amount unless a larger dividend payment is made to allow for this dilution.

All the best, Si

Si is looking at a different Annual Report from me. The 2021 Report tells me that issued and fully paid there are 226 million voting shares and 56.5 million non voting shares, a total of 282,500,000.

Dod

Sorry if the numbers are incorrect, I should've referenced the AR. It seems my source of share count numbers (Stockopedia) is completely wrong in showing 282,500,000 for both classes of share. In fact it is the total in issue across both classes.

All the best, Si

No harm done Si and it did generate an answer that was accurate unlike my initial sloppy thinking.

Still better than my "rubbish in, rubbish out" calculation. At least I tried!

All the best, Si

[moorfield]

Decided to bank a very handsome profit and move on. While some are counting their shares sitting in the winter rain, I will be taking breakfast looking out over the Indian Ocean at my favourite breakfast place just north of Fremantle. Flights courtesy of SDRC profits.

Looking to reinvest the remainder of the SDRC cash into something with a decent enough yield. LGEN, maybe. Doing the sums, I might even be able to get a higher income and the free flights from the proceeds of SDRC.

Doris, eat your heart out sitting in the rain counting your shares

Everyone has their own system. The medianic tinkerers here may well be contemplating some top slicing today but as ever the question to be answered first imo is "Where does the money go?" (if not on flights to Australia). 5% ish is still a decent yield for income and swapping for anything less (eg. plane tickets, yield = 0%) would of course be ratcheting down overall income rather than up as LGEN would. I have not held SDRC for long and will likely ignore it for now, I have other much lower yield holdings to deal with/upcycle first (starting with BA.).

[csearle]

Moderator Message:
Several completely off-topic posts removed. Please stick to discussing company share news on this board. Thanks - Chris

[monabri]

I find the market reaction puzzling based on the relative percentages of voting to non voting shares?

SDR down 1%, SDRC up 30%. The overall market value of Schroders has done rather well today.

[Dod101]

I find the market reaction puzzling based on the relative percentages of voting to non voting shares?

SDR down 1%, SDRC up 30%. The overall market value of Schroders has done rather well today.

Based on last evening's closing prices, I think these prices are about right. I arrived at £24.60 as the price at which the 'new' shares will settle at the current market cap. That is about where the non voting shares are today. The voting shares will still be subject to the 3 for 17 bonus shares and when that dilution goes through they will settle at around the same figure. I think as usual the market is being rational.

If the overall market cap is up there is no real logic to that that I can see.

Dod

[Dod101]

14.1% was what I calculated as well.

That's good to know you goty the same figure. Taking the last price I looked at SDRC 2450p and SDR 2924p it looks like there is a 16.2% discount currently for the NV shares. Pretty narrow and would look to indicate this is more or less a formality (unless the chances of improved terms for NV shareholders (in less bonus voting shares being issued) are cancelling out the chances that nothing will happen). Suspect there will be nothing to see here and it will all go through smoothly.

As I said. I do not think that difference is so much the discount as that the market is assuming the matter will go through and the pricing is on the basis that the voting shares will be diluted by the 1 for 17 bonus shares. If you take that into account there is very little difference in the pricing. Maybe the market is being premature I do not know. I am happy to be proved wrong though.

Dod

[Dod101]

Decided to bank a very handsome profit and move on. While some are counting their shares sitting in the winter rain, I will be taking breakfast looking out over the Indian Ocean at my favourite breakfast place just north of Fremantle. Flights courtesy of SDRC profits.

Looking to reinvest the remainder of the SDRC cash into something with a decent enough yield. LGEN, maybe. Doing the sums, I might even be able to get a higher income and the free flights from the proceeds of SDRC.

Doris, eat your heart out sitting in the rain counting your shares

Everyone has their own system. The medianic tinkerers here may well be contemplating some top slicing today but as ever the question to be answered first imo is "Where does the money go?" (if not on flights to Australia). 5% ish is still a decent yield for income and swapping for anything less (eg. plane tickets, yield = 0%) would of course be ratcheting down overall income rather than up as LGEN would. I have not held SDRC for long and will likely ignore it for now, I have other much lower yield holdings to deal with/upcycle first (starting with BA.).

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see. I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares. I am still puzzled about why they would do this. There has been no pressure that I have seen and I can only think that they want to do a share buyback (which I would be very happy with)

Dod

[KnightOfSpring]

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see. I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares. I am still puzzled about why they would do this. There has been no pressure that I have seen and I can only think that they want to do a share buyback (which I would be very happy with)

There was a question about if the management had noticed the especially high discount (and was there anything they were thinking of doing) that had arisen at the Full Year Results. They said they had noticed the discount but had nothing planned. Perhaps they could have started buying SDRC shares and retiring them, but not sure if that avenue was available to them, or indeed if they would be able to do much. Anyway it was the only time I recall hearing anything to do with SDRC at a Schroders meeting.

Would a share buyback have complications given the size of the SDR family shareholding?

Q1 update on Thursday by the way. Think it just given an update on Assets under Management totals with no commentary or meeting though.

[Dod101]

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see. I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares. I am still puzzled about why they would do this. There has been no pressure that I have seen and I can only think that they want to do a share buyback (which I would be very happy with)

Dod[/quote]

There was a question about if the management had noticed the especially high discount (and was there anything they were thinking of doing) that had arisen at the Full Year Results. They said they had noticed the discount but had nothing planned. Perhaps they could have started buying SDRC shares and retiring them, but not sure if that avenue was available to them, or indeed if they would be able to do much. Anyway it was the only time I recall hearing anything to do with SDRC at a Schroders meeting.

Would a share buyback have complications given the size of the SDR family shareholding?

Q1 update on Thursday by the way. Think it just given an update on Assets under Management totals with no commentary or meeting though.[/quote]

That is the point I have been making but no one has taken me up on it. I think like Caledonia, the family shareholding was at a level that they could not do any meaningful buyback without triggering the requirement for a full bid. If today’s proposals go through, that will bring the voting rights of the Schroder family back to around 43% or something like that.

Dod

[Itsallaguess]

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see.

I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares.

SDRC are one of a now dwindling set of single-share income-stocks that I still own, and as welcome as yesterdays price-rise was, it's not likely to have dropped the underlying yield to a level low enough to where I would normally look to rotate the capital into other income-opportunities, as is often the case with situations I've had with other single-share income-holdings that have had price-rising (yield lowering...) bid situations etc..

I do suspect however, that the processes initiated by Schroders yesterday have brought such a parting of the ways closer, and I think there may be a few more twists in the tale yet, following this move...

Cheers,

Itsallaguess

[BullDog]

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see.

I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares.

SDRC are one of a now dwindling set of single-share income-stocks that I still own, and as welcome as yesterdays price-rise was, it's not likely to have dropped the underlying yield to a level low enough to where I would normally look to rotate the capital into other income-opportunities, as is often the case with situations I've had with other single-share income-holdings that have had price-rising (yield lowering...) bid situations etc..

I do suspect however, that the processes initiated by Schroders yesterday have brought such a parting of the ways closer, and I think there may be a few more twists in the tale yet, following this move...

Cheers,

Itsallaguess

FWIW, I took the opportunity to split the proceeds of selling SDRC into topping up holdings in LGEN and MNG. Both have very handsome and seemingly fairly good quality yields. I still have exposure to the financial services sector but with a higher prospective income stream and one less share to think about.

[OldPlodder]

I think when the dust settles the yield will most likely be a good bit lower than 5% but we'll see.

I have no reason to sell Schroders as the price is not demanding anyway and what has happened today is simply a transfer of some value from the voting shares to the non voting shares, to my benefit and all those who have been holding the non voting shares.

SDRC are one of a now dwindling set of single-share income-stocks that I still own, and as welcome as yesterdays price-rise was, it's not likely to have dropped the underlying yield to a level low enough to where I would normally look to rotate the capital into other income-opportunities, as is often the case with situations I've had with other single-share income-holdings that have had price-rising (yield lowering...) bid situations etc..

I do suspect however, that the processes initiated by Schroders yesterday have brought such a parting of the ways closer, and I think there may be a few more twists in the tale yet, following this move...

Cheers,

Itsallaguess

FWIW, I took the opportunity to split the proceeds of selling SDRC into topping up holdings in LGEN and MNG. Both have very handsome and seemingly fairly good quality yields. I still have exposure to the financial services sector but with a higher prospective income stream and one less share to think about.

Such a move was imho, a no brainer for any SDRC income investor. Bag in five odd years worth of Divis, reinvest the proceeds in other better yielders, no sweat. Very large increase in portfolio income at no costs, even taking trading costs into account. I was very surprised that so many did not seem to follow you.

Plodder