Gsk Share Discussion Threads

[jonjoneil] 21/6/2022 13:33

Thanks TM.
I wonder why Glaxo couldn't have divested consumer in the same way?

[tradermichael] 21/6/2022 12:52

Prior to the Demerger, GlaxoSmithKline Consumer Healthcare Holdings (No. 2) Limited (“JVCo”), the current holding company of the Consumer Healthcare business, will pay dividends to GSK and Pfizer.

32 per cent. of HAL total ordinary ordinary share capital will be held by Pfizer. In keeping with Pfizer’s transformation into a more focused, global leader in science-based innovative medicines and vaccines, Pfizer intends to exit its 32 per cent. ownership interest in Haleon in a disciplined manner, with the objective of maximising value for Pfizer shareholders.

[jonjoneil] 21/6/2022 10:07

How are Pfizer handling their part of the split?

[anhar] 21/6/2022 10:00

Consolidations are common, usually accompanying a substantial cash return though in this case it's the demerger. In effect they compel the sale of part of your holding. You end up with fewer shares in the original company but in return some cash, or in this case Haleon shares.

Their purpose is to try and maintain approx the same share price before and after the consol for cosmetic purposes because a big price drop doesn't look too attractive. It's rather craven of the companies and I find them something of a nuisance though I do welcome cash returns and demergers.

Note that consols are not essential in these situations. For instance BHP recently distributed WDS shares with a seriously large sum involved, but did not bend to the consol fashion that most companies would in this situation. Good for them I think.

[tradermichael] 21/6/2022 09:53

Not in ISAs, liable for CGT!

[lippy4] 21/6/2022 09:27

if they are all held in a isa no problems...

[tradermichael] 21/6/2022 09:25

Yes, but its more complex than that.

For example, if they are sold separately at different times ..... what cost new GSK, what cost Haleon?

[jonjoneil] 21/6/2022 09:01

ISAy ISAy ISAy. Don't have that problem.

Surely, if you sold both companies in the same tax year the base cost would be the same as if you sold them now. Any gain would be on the two companies added together.

[spyder] 21/6/2022 08:35

—> TM
I suspect that the calculation will be quite complex, but that the company will advise us once the transaction is completed?

[tradermichael] 21/6/2022 07:17

Question is:

If you held Company A and later sell new Company A and Company B and make a gain, what price do you apply to the Capital Gain calculation as the base cost of the shares for tax purposes?

[pierre oreilly] 20/6/2022 23:11

Co A worth £10

Splits off assets worth £2 into company B. Co A now worth £8

Co A consolidates 4 for 5

co A now worth £10 again, but you only hold 80% of the shares in A which you previously held. You also hold shares in co B worth £2.

[sajad37] 20/6/2022 20:25

Could you provide an example please

[patientcapital] 20/6/2022 16:48

That's correct.

[jonjoneil] 20/6/2022 16:32

The value of GSK shares will be reduced after Haleon is taken out. I think consolidation is the process of reducing the number of GSK shares to bring the value of each new share to approximate the price immediately before the split. So you will have less GSK plus Haleon (to equal the value of your pre-split holding).
So, in theory, if you sold your Haleon shares immediately after issue, and brought new GSK with the proceeds you would end up with the same number of GSK shares that you had pre-split

I'm prepared to be corrected.

[maxplus2] 20/6/2022 15:46

Received this Corporate Action regarding GSK. What do they mean by consolidation?Consolidation of GSK shares at a rate yet to be determined, effective 19th July 2022.

[tradermichael] 20/6/2022 11:49

Thanks anhar!

[alphorn] 20/6/2022 11:49

It will be interesting to see how the (country) source of the income streams and the point of dividend payments pans out.

[anhar] 20/6/2022 11:45

I have little interest in capital valuations and fluctuating market prices or "valuations" here. In this situation I just have a general expectation, based on lengthy experience, that over time it will benefit me, despite as I said, the initial combined income being a lot less than old GSK. I accept that it may not work out that way, that's the risk I take, but doing nothing, in my strat, is nearly always the best approach in the end.

[tradermichael] 20/6/2022 11:30

Ok, so if it happens that one is overvalued and the other is below your target level of return, you sell out the undervalued one? Surely 'Day 1' valuations will be a bit skew before the market settles them down?

[tradermichael] 20/6/2022 10:46

anhar:

I have always liked your investment strategy (investing for dividend income). Sure, we'll end up with two companies in the FTSE100 but accompanied by a net cut in dividend. Its at what point after the 'split' do you consider ownership of two distinct companies in your valuations?

[anhar] 20/6/2022 10:34

TM: ...I hate demergers and consolidations!

I love 'em.

Speaking purely as an income investor with a large diversfied port, and most shares in it held very long term, I have found corporate actions like this to be overwhelmingly beneficial over time to my port income - and capital value too though that's not why I invest. And that's even the case in a demerger like here where the initial income from new GSK + Haleon will be substantially less than old GSK.

This is just from my personal strat viewpoint as an income player. It usually works out well provided investors have patience to hang on to the new corporate arrangements and don't make short term decisions based on some press or broker comment or whatever. Just do nothing is my approach and you are likely to be rewarded. Not every time, there are no certainties with equities but if I look back over the decades of income investing, this sort of thing has been much more beneficial than not, despite the odd poor outcome.

[keyno] 20/6/2022 09:17

Many thanks, Glorious. When you put it like that it is rather obvious...........

[geckotheglorious] 20/6/2022 09:01

Keyno
Post 29845
"I don't understand why H is being saddled with all the debt. It can't just be the prospect of jam tomorrow for Haleon, surely? What am I missing (apart from a bigger brain...............)? Would somebody be kind enough to explain?"

It's obvious why Haleon is being saddled with all the debt.
Haleon has most of the cash flow that pays the dividend.

New GSK, on its own doesn't have the predictable cashflow to cover both debt payments and divi - and given said cashflow is likely to be lumpy, it makes sense to saddle the cash cow with as much of the debt as possible leaving new GSK free to ramp up R&D spend - for this is what the company will now live or die on - R&D success and resultant moneyspinning blockbusters.

[tradermichael] 19/6/2022 18:05

Well, I've made a great deal of money on these over the years both from buying and selling and from the dividends that I have continually reinvested.

I would be happy to stay invested in new GSK if the dividend was not due for a cut, and I'm not keen on staying in Consumer Healthcare as a stand-alone company.

I'd be happy to sell out both entities for now, providing I can get above my break even.

I hate demergers and consolidations!