Diversified Energy Share Discussion Threads

[stevensupertrader] 09/3/2024 09:41

I was informed that both dividend and tender offer proceeds ( not net profit) will be subject to 30% US withholding tax unless In SIPP as US won’t know what the price you paid the shares however one has to reclaim later (providing supporting evidence) .If that is the case, 30%. withholding tax will definitely wipe off even the capital let alone any little profit . Why would anyone opt for this Tender offer unless the shares are held in the Uk SIPP ? - no brainer imo

[bountyhunter] 09/3/2024 08:51

Further to the above as the dividend is in USD with the exchange rate not yet declared the break even price calculation (for those subject to the 30% withholding tax on the dividend) should really be in dollars. By break even I mean the share price at which taking the dividend or taking up the tender offer (for those subject to the 30% withholding tax on the dividend) would result in the same outcome.

So the share price at which taking the dividend or the tender offer would yield the same amount for those subject to 30% withholding tax on the dividend would be:

((0.875*0.7)/5)*100 = $12.25 which at the current exchange rate is £9.53.

It will be interesting to see if the average market price for the 5 business days to 26 March exceeds that level.

[bountyhunter] 08/3/2024 20:25

My DEC shares are in an ISA so as I have completed a W-8BEN I will receive a dividend of 68p * 0.85 = ~58p per share.

Let's say the average price for the tender offer in just over 2 weeks time is £10 (a fairly generous assumption) then if I had tendered my shares I would receive £10.50 per share.

However by not tendering them I will have £10.58 per share. Since even if I assume the XD price reaches £10 for the tender offer I would be out of pocket when held in an ISA or SIPP if I tendered my shares, it seems most sensible to do nothing and receive the dividend in this situation.

Things would be a bit different if I had 30% tax to pay on the dividend as I would then only have £10.48 per share after paying the 30% tax on the dividend vs £10.50 under the tender offer. However as £10 still seems like a generous assumption for the average share price (given that the tender offer date is not far off) even then it's a close call. I can only see the tender offer being of interest to large institutional holders wishing to dispose of shares without affecting the market as they do so, such as M&G possibly?

For any holder paying 30% tax on the dividend I make the break even tender offer price at the current exchange rate ~£9.53, since £9.53*1.05=£9.53+(0.68*0.7) i.e. ~£10.00 in total for either option.

Nai, dyor.

[stevensupertrader] 08/3/2024 20:00

2wild - then you waived your Q3 div if successful and the div of 87.5 cts each share that went ex on 29 Feb 2024 , you kissed goodbye the div. GGOOD LUCK PAL

[2wild] 08/3/2024 19:29

What Hassle? I pressed 2 links and entered Number of my DEC to tender, on Interactive investor website Today.
Just after announcement. I increase my dec by 18% at 902p a share. Assuming unchanged share price will get half cost opurchase in tender at 947p [902 + 5%]. Effectively increasing number of shares by 9% at 857p, yielding 33%. I love attender. They are not just for institutional investors.

[stevensupertrader] 08/3/2024 19:27

I still understand your logic . You can too say that the shares you sold at 5# more and not entitle for the div which is at current price is 7.5% more than the 5% being offered . The shares can also go up more than the 5% and you cannot buy back - ALL IFs .
As for me , I won’t do your way unless share price went over £12, I would rather take my div and wait and have full control of the situation ie to sell in a later date ,
One world be better off getting the div if the current share price won’t go above £12 imo

[redsonning] 08/3/2024 19:05

The point is that the tender price is higher than the current price - that's all that matters. I can always buy back my tendered shares in the market if I choose to do so.
So my question to fordtin does still remain relevant.
There seems to be a lack of clarity about whether tendering a small part of one's holding would result in all of those shares being purchased - that is the point. If not all of the shares tendered are purchased, but the loss of dividend then results on the non-purchased share, then of course yes, I understand that is not a good deal.
But the scenario I have put to fordtin would be a decent deal (ignoring tax effects for now).
That's what I'm trying to understand.

[stevensupertrader] 08/3/2024 18:56

Redsonning. Unless your 197 shares that you bought less than the tender offer price , otherwise tell me what the point to let DEC to sell for you at a loss ???!!!!

[fordtin] 08/3/2024 18:48

redsonning - I emailed a few questions to Diversified, including some along similar lines to yours.

This is yesterday's post from the other thread;

--------------------------------------

I posted the following 8 days ago;

If you email DEC with enquiries about the Tender offer, they will send the following reply;

"Diversified has engaged Computershare Investor Services PLC to act as Receiving Agent in the United Kingdom and Georgeson LLC as Information Agent in the United States to service holder queries such as this. I would encourage you to reach out to the appropriate Agent based on your geography and shareholding, at the contact information provided below.

Computershare Investor Services PLC
[phone]

Georgeson LLC
[phone]"

If you phone Computershare now, you will be advised to call back later or go to their website.

The website will lead you through a web of irrelevent FAQ's.

When you eventually find "send an enquiry", you will get the following response;

"Enquiry Successful
Your enquiry has been successfully submitted and you should receive a response within 10 working days. Please await our reply before contacting us regarding your enquiry.
"


This morning I received the following emailed reply;

"Thank you for your recent communication.

Stockbroker
For your information, as you are not a shareholder registered on the Diversified Energy Company Plc register you will need to contact your stockbroker directly"


---------------------------------------------

While searching for the above post, I also found my first post after the offer was announced (made at 07:42 on 26 Feb '24) I highlighted the part that say's if you want the dividend, do nothing.
At the time I didn't realise that, for the majority of shareholders, that was probably the only bit worth reading!


"YOU SHOULD READ THE WHOLE OF THIS CIRCULAR, WHICH CONTAINS THE
MATERIAL TERMS OF THE RETURN OF CAPITAL, AND NOT JUST THIS SECTION,
WHEN DECIDING WHAT ACTION TO TAKE. IF YOU WISH TO RECEIVE YOUR
ENTITLEMENT TO THE Q323 DIVIDEND, YOU DO NOT HAVE TO TAKE ANY FURTHER
ACTION AND YOU WILL BE PAID YOUR ENTITLEMENT TO THE Q323 DIVIDEND ON
28 MARCH 2024."


-

[redsonning] 08/3/2024 17:19

fordtin - Thanks for your example calculation.
But can't you simply Tender 197 shares under the Entitlement, and expect to have all of those purchased from you for £2,068 and then receive your Dividend on the non-tendered shares of 2,803 and receive £1,939 in Dividend payment too.

What am I missing, or getting wrong?

[blue square] 08/3/2024 14:27

It was always a waste of time for
small investors.

[stevensupertrader] 08/3/2024 14:20

I don’t want to sound rude but that is a fact

[stevensupertrader] 08/3/2024 14:18

Any price under £11 - better to do nothing - only mugs still think under £11 still a good thing .

[blue square] 08/3/2024 14:01

SuperSteven
Even if the price averaged
8.9P that would still equal
a tender price of 9.35p
i.e 8.9p +5% = 9.35p approx

[stevensupertrader] 08/3/2024 13:52

As US$ Weakened against the £ , Option 2 scheme will flop .

[fordtin] 07/3/2024 20:12

"What's the point of Diversified Energy's tender offer?

Diversified’s tender offer has led to much discussion on several platforms. The general consensus seems to indicate the tender offer is a very bad deal for the majority of Diversified’s shareholders and has been primarily crafted to appeal to the share holders who were consulted prior to the tender offer.

If you weren’t consulted, it’s probably not for you!

If I accept that to be the case, my next question is;

how could the like of M&G and Blackrock make the deal work to their best advantage?"

continued



"Let’s do a few back-of-a-beer-mat calculations for that;

Ivor;
waives his right to 3,000 * $0.875 = $2,625 (@ $1=$1.265) = £2,075.10

tenders 3,000 shares @ at a tender price of £10.50 per share

has 197 shares bought from him for £2,068.50 being the nearest whole number

is left with 2,803 shares and £2,068.50, instead of ignoring the tender offer to retain his original 3,000 shares and receive his entitlement to £2,075.10 in dividends.

That seems like a terrible deal for Ivor, He’ll have donated 197 shares to DEC for nothing. Although it would be a great deal for the company and consequently all shareholders who don’t tender any shares."

continued

[bountyhunter] 07/3/2024 19:18

Exactly, possibly aimed at M&G who may even have been consulted.

[97peter] 07/3/2024 19:07

Totally true Stevensupertrader. This is why for most PI’s it is not worth the hassle or long term value? However for large MM’s and investment trusts wanting to offload a few £500,000 or 1 million pounds of shares and re-allocate then this offer will be for them!

[tag57] 07/3/2024 19:00

SST my point was that with the divi being approx 7%of the market cap and the potential for the divi to be reinvested that could exert a fair amount of buying pressure on the SP, potentially pushing the share price beyond the 5% being offered by DEC anyway.

[bountyhunter] 07/3/2024 18:52

Do institutional investors have to pay capital gains tax? Presumably definitely not if offshore but would still be subject to the 30% witholding tax on the dividend, just to throw another spanner into the works.

[1knocker] 07/3/2024 18:14

Let's hope plenty DO take up the tender offer. Great for the company and continuing shareholders: company uses a tender offeror's accrued dividend to finance its purchase of his shares!!

The tax man will be happy too, as income tax ids paid on the proceeds of the shares, and the sale will not generate a capital loss to set against gains for CGT purposes!!

It seems to me that everyone is a hands down winner except the tenderer of the shares.

Sometimes HL give a warning when they notify holders of offers to tender and opportunities to purchase shares, as in 'the market price is currently lower than the price you would pay if you take up the rights to purchase further shares'. No such warning this time though, save the obligatory warning to think about the tax consequences.

[spangle93] 07/3/2024 17:50

Sorry if this has been done to death, but regarding the choice of what to do with your dividend payment, I have belatedly been given information by H-L

Important tax consequences of the offer

Please note both the dividend and tender offer proceeds will be subject to tax consequences.
It’s expected the dividend will be treated the same as all US dividends and subject to US withholding tax, unless you hold shares in a SIPP.
It’s also expected that cash received in the tender offer will also be treated as if it was a dividend and may therefore also be subject to US withholding tax.

My DEC shares are in an ISA. I thought one of the advantages of the new scheme was that it would attract CGT (should there be a gain) rather than income tax. But from H-L's guidance, there's no real advantage to selling the shares, because the same tax liability is incurred whether you take the divi or sell the shares

[elpirata] 07/3/2024 17:48

Thats a cracking interview which even snowflakes might understand