Money: Northern Rock shares worth hanging on to
Nic Cicutti looks at prospects for the latest building society float
Saturday 06 September 1997
Almost 900,000 members, who voted overwhelmingly in favour of Northern Rock's demutualisation, will each receive 500 free shares in what is only the second flat-rate distribution to date.
Those who are both borrowers and savers will receive 1,000 shares each. Experts suggest that the value of a 500-share package could reach pounds 2,000, with 1,000 shares valued at double that amount. However, recent stock market uncertainties have have led some observers to wonder whether this is an over-estimate.
To qualify for shares before the planned flotation date on 1 October, members of the Newcastle-based society must complete and send back a form by 26 September. The forms will give a choice of selling or keeping the shares.
Roddy Kohn, a financial adviser at Bristol-based Kohn Cougar, says: "My advice generally is that unless you need the money for a special purpose, you should try to keep the shares. Northern Rock is a small but well-run society which could well prove attractive to a potential buyer over the next few years.
"It is hard to see it doing so badly that hanging on to the shares is a mistake. The only question mark might be in the event that the current stock market bull run, which has particularly benefited financial stocks, might lead to Northern Rock being somewhat overvalued at flotation.
"There is also a danger that share prices rise heavily in the first day of trading, only to subside slowly in the following months. But over the longer term, these shares are not an unsafe investment."
Members who want to sell their shares immediately can do so through the society's own share sale facility, handled by Hoare Govett Securities.
Selling this way means signing and returning the green form B in the Northern Rock mail-out, headed "Selling Your Free Shares". If the form is received before 26 September, the shares will be sold at a collective auction on 30 September, although additional auctions may follow.
There will be a fixed dealing charge of pounds 10 for each 500-share parcel. Although you cannot sell part of a 500-share distribution, if you are entitled to receive payouts as a borrower and a saver, you may sell one of the two.
If you want to keep the shares, fill in and send off blue form A, called "Keeping your Free Shares". This can either be in the Northern Rock Shareholder Account, or by asking for a share certificate.
You can keep the certificate, which will be sent to you before 1 October, and receive regular dividend payments. Dividends are normally paid in May and October, with the first payable in May 1998.
Alternatively, you will be allowed to place your shares in a PEP, which must be done within 42 days of receiving the certificate if you wish to avoid any tax liabilities.
Placing the money in a PEP generally makes sense if you are a higher- rate taxpayer or if you are planning other PEP investments - many fund managers will allow you to shelter your shares in their PEPs as long as you are prepared to invest in their their own PEPs.
If you have other demutualisation or similar shares which are not already in a PEP, it may make sense to consider "bed-and-PEPing", which involves selling the shares and buying them back inside a PEP.
Such a move may have capital gains tax implications so you should seek advice before doing anything.
For an independent financial adviser near you, call 0117971 1177
Solar on Schools project offers green investors 'tangible, ethical assets'
easyJet founder Sir Stelios Haji-Ioannou aims to make buying a home easier
Life expectancy calculator will allow people to plan ahead but needs to be handled carefully
Do alternative savings offer happy returns?
How to start your own internet business
- 1 ‘Leeds is on fire’: Huge chemical-fuelled blaze on Armley industrial estate leads to hazardous smoke warning for city
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Queen turns 88: David Bailey captures another side of the Queen in birthday portrait
- 4 Loch Ness Monster found on Apple Maps?
- 5 Criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
An open letter to Nigel Farage: you may smile, but I am not seduced
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Abdullah Deghayes: My son was the martyr of a just cause, says father of British teenager killed in Syria conflict
iJobs Money & Business
Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...
£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...
£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...
£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...
Day In a Page
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds