Making sense of Vodafone share options
Q&A: Dominic Coyle continues to tackle the Vodafone issue
Thanks for the advice re the Vodafone shares. However, there are a couple of issues I am not clear on. The first is, does one have to vote on the proposal? Secondly, rather than end up with a mixture of Verizon shares, cash and Vodafone shares, could I not just sell the Vodafone shares now through Computershare and be done with it?
Also, I can’t understand why they would set up the “income” option rather than the “capital” as the default option when the vast majority of Irish investors would choose the capital option.
Mr JG, Galway
As Vodafone holds its shareholder meetings today to vote on the Verizon deal and the “return of value” to shareholders, your first question reflects the concern of a large number of people who have been in touch with me in the past fortnight – especially those who, for one reason or another, never got the information pack and voting forms.
The good news is that you don’t have to vote to be able to participate in the windfall, or “return of value” as Vodafone terms it. However, if you want to have a say in how you receive your cash and shares, you will need to make make sure that all shareholders sign and return that white “form of election return of value” form before February 20th.
Otherwise, Vodafone will decide how you get your windfall – a not insignificant issue as the default option is that you receive both the cash and the shares as “income”, meaning you will be liable for income tax, universal social charge and PRSI on the full value of both (c€1.25 per Vodafone shares). For a higher rate taxpayer, this would mean well over half your windfall going to the taxman.
As the capital option will mean no tax bill at all for almost all Irish shareholders, is the income option, the possible cost of inaction is high indeed.
As the deadline is almost a month away, there is plenty of time to contact Vodafone on the helpline (01-6968421) and get them to send out the relevant white forms. Given the number of shareholders involved, I’d do that sooner rather than later. You’d hate to get caught by tax for the sake of a quick phone call.
On your second point, you can sell your Verizon shares cheaply as part of this process – and as you get only one Verizon share for every 35/40 Vodafone shares that might make a lot of sense. However, there is nothing in the current deal to facilitate a low cost dealing option for shareholders on their Vodafone stake itself.
I have raised the issue with the company – with shareholders holding as few as 50 Vodafone shares, or even less – the standard costs in selling shares effectively force them to hold on to their stock, especially as it is still trading at a loss. If anything emerges, I’ll certainly let you know.
On the final point, it is worth remembering that Irish shareholders form a tiny fraction of the overall value of Vodafone shares. And, in many countries, the capital option is not possible. On that basis, it made more sense for the company to make the income option which can apply in all jurisdictions the default.