Do WHA/T?
Posted on January 19, 2009 by Richard Beddard
Filed Under Companies |
The ‘A’’s have it
Say you read February’s Share Sleuth article, the column I write for Money Observer magazine, which will be on Dewhurst. You like the sound of the company. You do your own research. You still like the sound of the company. Which shares do you buy?
Dewhurst is one of, I believe, a diminishing band of companies with more than one class of share. It has ordinary shares, and it has non-voting ‘A’ ordinaries. Both are listed on the stockmarket, the ordinaries are DWHT and the ‘A’’s are DWHA.
Both have the same rights, they rank pari passu, except the holders of ‘A’ Ordinaries are disenfranchised. They cannot vote on company resolutions. Companies often issued non-voting shares when the existing owners wanted to raise money, without relinquishing control.
It’s worth considering control. Their small shareholdings buy small shareholders very little control, especially where, as in the case of Dewhurst, 71% of the shares are owned by major shareholders, a list headed by the company’s chairman and chief executive.
But that worthless vote comes at a price, about 30p a share, because DWHT shares cost 185p, and DWHA shares cost only 155p.
Since the two classes of shares are otherwise equal, they receive the same dividend. Shareholders of either stripe will receive a total dividend of 5.76p per share for 2008, and, since you can buy more non-voting DWHA’s with the same amount of money, DWHA holders will be the wealthier for it. The dividend yield on the ordinaries is 3.1%, while the dividend yield on the ‘A’s is 3.7%.
Company law protects non-voting shareholders, so ordinary shareholders can’t just table a resolution to vote them out of existence or take away their right to a dividend, not, at least, without their agreement, which would be a bit like the proverbial turkey voting for Christmas, or banker turning down a bonus.
Decades ago, unconventional share classes were more common, at companies like Whitbread and Young’s. Investing in the non-voting shares was the norm. Many people owned Young’s shares for the perks that came with ownership, one of which was a seat at the AGM, a massive piss-up, which moved to the Grosvenor Hotel in its glory days.
Peter Temple remembers his days as a brewery analyst fondly. He says John Young would chair the meeting in a white suit and at the first sign of a tricky question he’d reply,
“Well that’s a very interesting question, but I’m getting very thirsty. Aren’t you?”
It was a phrase shareholders greeted with a roar of approval and interpreted as a signal to adjourn to the bar.
Sadly for the AGM, Dewhurst doesn’t make beer, it makes pushbuttons for lifts, but if, as is the wider trend, Dewhurst were to enfranchise its non-voting shareholders that would, presumably boost the value of ‘A’ shareholdings at the expense of the ordinaries, so, for a number of reasons, none involving beer, it seems like the ‘A’’s have it.
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