Stocks: Please help me interpret
You are going to need a tax advisor.
Some of the options you present could be treated as either ordinary income or as capital gains. And, there is the issue of the foreign State's taxes.
I am not familiar with the term "ADS", but it might be the foreign State's term of art for that which we call American depository receipts; and if so, might eliminate concerns regarding the foreign State's taxes.
Assemble the documents you have regarding the investment, including anything reflecting the date of acquisition of the asset, and present them to a tax advisor for their advice as to how you should proceed.
I hope all goes well.
TomR
If I'm reading their example correctly, the stocks I have are worth less than $20 in total -- so not worth paying someone to advise. (Since the tax piece is probably not of consequence).
I found a FAQ, and I think it clarifies a bit in their rewording:
- Default option: Receive cash at a fixed price
- Option 1: Receive cash by selling on the market
- Option 2: Receive new ADSs (shares)
- Option 3: Receive cash through payment of the interim dividend
So, I probably want one of the cash options (may as well stop wasting their paper and my filing cabinet space on this handful of shares).
Option 1 seems most risky/annoying for little benefit, so I'll skip that. Their calculated examples show Option 3 as having the same payout as the Default Option. So, I guess my question now is just: What does "Receive the interim dividend" mean?
Tom_R said:
You are going to need a tax advisor.
Some of the options you present could be treated as either ordinary income or as capital gains. And, there is the issue of the foreign State's taxes.
I am not familiar with the term "ADS", but it might be the foreign State's term of art for that which we call American depository receipts; and if so, might eliminate concerns regarding the foreign State's taxes.
Assemble the documents you have regarding the investment, including anything reflecting the date of acquisition of the asset, and present them to a tax advisor for their advice as to how you should proceed.
I hope all goes well.
TomR
An ADR is for the issuance— its like a single stock cert comprising x shares. An ADS is an individual share (thus the “S”) within said issuance. So, basically, you might have one ADR comprising x ADSs.
Ad to tax, dividends and other corporate actions are often subject to mandatory withholding. Some is often reclaimable under treaty, but in sprout’s case doesn’t appear to be worthwhile to worry about.
sprout- Is this an optional stock dividend (they’re initially offering scrip but giving the option for a cash dividend), an exchange (old ADS vs new) or a rights offering? Different things. Either way, if your holding is as negligible as it seems, I’d take the cash and be done with it. All the “interim” means is that the payout was declared prior to earnings. From the standpoint of an investor, that it’s interim or final is basically a non-issue.
Actually, in looking at it again, the right is probably on a 1:1 basis to entitle you to a choice to receive addl ADSs as a dividend instead of only cash... this is basically a standard OSD it seems.
Here are your options:
Default: Sell right to receive addl ADSs back to them at their fixed price. Cash paid to you and no new ADSs received. Probably foreign tax withheld. Old ADSs remain.
Option 1: Sell right to receive addl ADSs at market (this is done in bulk by their US depositary, not by you). Cash paid to you and no addl ADS received. Probably no foreign tax withheld. Old ADSs remain.
Option 2: Keep right, and they will exercise right and grant additional ADSs, adding to existing holding. No cash received (other than tiny amount, if any, to cover fractional shares). No foreign tax withheld.
Option 3: Forego right, cash dividend paid in lieu of addl ADSs. Foreign tax will be withheld. Old ADSs remain.
sprout said:
I found a FAQ, and I think it clarifies a bit in their rewording:
- Default option: Receive cash at a fixed price
- Option 1: Receive cash by selling on the market
- Option 2: Receive new ADSs (shares)
- Option 3: Receive cash through payment of the interim dividend
So, I probably want one of the cash options (may as well stop wasting their paper and my filing cabinet space on this handful of shares).
Option 1 seems most risky/annoying for little benefit, so I'll skip that. Their calculated examples show Option 3 as having the same payout as the Default Option. So, I guess my question now is just: What does "Receive the interim dividend" mean?
"Receive the interim dividend" means that you will receive a cash dividend just as you would with a domestic stock. Foreign tax will be withheld which you can claim as a foreign tax credit on your 2018 income tax, although in your case the dividend will be so small that it probably won't be reported.
I'm familiar with options 2 and 3. I hold stock in Royal Dutch Shell and several years ago, when oil prices fell dramatically, in order to conserve cash, Royal Dutch started offering shareholders the option to take stock or a cash dividend. The cash dividend was the default.
The cash was the default and not the stock? That’s odd... you’d think in a short-term cash-strapped situation they’d increase equity not deplete cash reserves.
ctrzaska said:
Actually, in looking at it again, the right is probably on a 1:1 basis to entitle you to a choice to receive addl ADSs as a dividend instead of only cash... this is basically a standard OSD it seems.
Here are your options:
Default: Sell right to receive addl ADSs back to them at their fixed price. Cash paid to you and no new ADSs received. Probably foreign tax withheld. Old ADSs remain.
Option 1: Sell right to receive addl ADSs at market (this is done in bulk by their US depositary, not by you). Cash paid to you and no addl ADS received. Probably no foreign tax withheld. Old ADSs remain.
Option 2: Keep right, and they will exercise right and grant additional ADSs, adding to existing holding. No cash received (other than tiny amount, if any, to cover fractional shares). No foreign tax withheld.
Option 3: Forego right, cash dividend paid in lieu of addl ADSs. Foreign tax will be withheld. Old ADSs remain.
When you say "old ADSs remain", does that mean I'll still have the handful of shares? So none of these options would end my shares completely?
Um, stocks question 101: What is the process to sell off all my shares (since I obviously don't work with a stock broker)?
sprout said:
Um, stocks question 101: What is the process to sell off all my shares (since I obviously don't work with a stock broker)?
Considering that the value of your stock is only about $20, you might want to take the additional stock instead of the cash dividend, and put the stock away for several years. You could open an account with someone like Schwab and sell your stock with a commission of $4.95. No fee to open the account.
In some cases, a company will occasionally offer to buy "odd lot" shares at no cost. It saves them the mailing costs involved with small share holdings, but this kind of offer is made to all shareholders. You might be able to contact the company and tell them that you would like to get rid of the stock and see if they have any suggestions.
You could also ask your bank if it will sell your stock for you.
What stock, if you don’t mind me asking? And are these in physical form (ie paper cert) or book entry (electronic form)? If the latter, some broker is holding them at their custodian bank for you, and you may just be able to deliver them to someone you know with an account at the same broker for cash. Or breakfast at Village Coffee. Or something. Else you can reach out to the shareholder services number on the co website and ask them as Cramer suggests.
If these are worth less than $20, why not liquidate them and clear your mind of the hassle? Put the $20 in your bank account...
That's my thinking. My last question was how I should do that as I don't have a broker. Maybe I asked the question incorrectly.
Usually I would, but it seemed like a good low-stakes opportunity to learn something new.
Back to the original question, the easiest thing to do is go with the default option / not respond at all. That's what normally happens in these situations.
Yes.. and that's what I'll be doing. But from ctrzaska's post above, that won't end my shares, they will just send me some amount in some format (I guess due to the sale of the company? Or in lieu of the regular dividend?), and my shares will end up moving over to the new company.
So, it appears that it takes a different process to liquidate these few shares. It won't happen via this Election Form.
You might want to find out what the shares are worth before assuming the value is less than $20.
joan_crystal said:
You might want to find out what the shares are worth before assuming the value is less than $20.
Good advice. If you don't know the stock symbol, just Google "what is stock symbol for x co?" Then put in the stock symbol in the top left blank space. You don't have to be a Fidelity customer to get a quote.
I grew up in a family that lived check-to-check for most of my childhood, so I have no clue when it comes to 'finance'. My grandmother, thinking it was a good thing to do with a very small bit of savings, bought me some stock as a gift a while ago, and I've basically been ignoring it. But I just got a "Form of Election" (where the company announces it's "intention to offer its shareholders of record a scrip dividend") mailing with these options:
Can anyone help me understand what each of these mean in English, the potential risks/benefits of each option, and what the difference is between option # 1 and #3?
ETA: There are some mentions of tax withheld (or not withheld) by the foreign countries in Options #1 and #3, which I'm also having trouble deciphering)