Top-Up Plan For Contact’s Small Shareholders
Innovative Top-Up Plan For Contact’s Small Shareholders
Small shareholders in Contact Energy will be offered the opportunity to acquire additional shares in the company in lieu of their regular dividend payments, in a new scheme announced today by Contact Energy Limited today.
The share top-up plan is a first for New Zealand. While traditional share top-up schemes have involved issuing new shares, participants in the plan will instead buy already issued shares from the organising broker, ABN AMRO Craigs Limited. This means the plan will not dilute the value of other shareholders’ shares. The new scheme will be open to Contact shareholders who hold 5000 shares or fewer. Approximately 100,000 shareholders fall into this category.
“Contact has the one of the largest bases of small shareholders in New Zealand and the company is committed to meeting the needs of these investors,” said Contact’s chairman, Phil Pryke. “We also recognise that many of our shareholders are not habitual investors and find it difficult to cost-effectively increase their stakes.
“My fellow directors and I have had consistent feedback from small shareholders and their representatives that some shareholders would rather use their cash dividends to increase their stake in the company,” Mr Pryke said.
“We have been working for some time on a plan that would meet this need without disadvantaging other shareholders.”
A traditional dividend reinvestment plan would see a company issue new shares in exchange for the dividend payment, thereby diluting the value of all currently issued shares.
“However, Contact does not require new capital at present and we do not want to dilute the company’s issued capital each time there is a dividend.
“I am personally delighted to be able to offer shareholders this plan as it offers benefits to all shareholders. “Participating small shareholders are able to increase their holding in a cost-effective manner without having an impact on the value of the rest of the company’s issued capital,” said Mr Pryke.
“All shareholders will also share in any associated liquidity benefits.”
Mr Pryke said the plan would be administered by Contact’s share registry, Computershare and ABN AMRO Craigs, as organising broker.
“There will be no costs to participating shareholders and no commission paid to ABN AMRO Craigs.”
Mr Pryke said any shareholders with 5000 or fewer shares could register for the plan. Shareholders who did so would have the opportunity to purchase more shares with each six-monthly dividend payment until they held more than 5000 shares or the plan was withdrawn. The limit has been set at 5000 shares as this was assessed as being at a level where shareholders could cost effectively buy shares without the aid of this plan.
Eligible shareholders would be invited to register for the plan prior to 20 November 2003. This would ensure that their share of the 2003 final dividend would be reinvested in additional shares.
Eligible shareholders could apply for the plan at any time, as could any new shareholders who purchased 5000 or fewer shares in Contact on the NZX in the future.
“As each dividend payment is reinvested in shares, shareholders will be advised by Computershare Investor Services as registrar, how many shares they have purchased with their dividend, the balance of dividends held over until the next dividend payment, as well as a notification of gross income and imputation credits.
The Chief Executive of the New Zealand Exchange, Mr Mark Weldon, praised the Contact initiative.
“This is a very positive and highly innovative programme that Contact has initiated,” said Mr Weldon. “It's a tremendous way to recognise and reward smaller retail investors, allowing them to grow their capital stake over time in a low cost way, whilst at the same time encouraging greater participation in the company.”
ABN AMRO Craigs Managing Director, Mr Neil
Craig, said his firm was delighted to be involved in helping
to design and implement the plan. It is truly unique and
allows small retail investors, many who bought shares for
the first time in the float of Contact, to top-up their