Q&A

Canada Life share certs: In the recent takeover of Canada Life by Great-West Lifeco, due to proration, I have ended up with some cash and three small amounts of Common, Series E and F share certificates.

I now wish to dispose of the share certificates and have been told by a stockbroker that it will cost a minimum of 70 for each certificate. This is half the value of one of the share certificates!

Any advice or knowledge of an assisted sale procedure for certificates would be appreciated. Ms E.C., Dublin

If you have ended up with a mix of cash and the various types of shares following the sale of Canada Life to Great-West LifeCo, it is probably either because you opted for such an arrangement or because you did not get around to sending back the form expressing your preference. To be fair, if the latter is the case, you are not on your own. People holding 24 per cent of all the Canada Life stock failed to return those forms.

One side effect was that the demand for payment in cash was lower than expected. The way the Great-West Life deal was done, only 60 per cent of the purchase price was paid in cash. The balance came in common shares and special Series E and series F shares.

As a result, Canada Life shareholders could only get cash for 60 per cent of the firm's shares. Great-West Life asked shareholders to express their preference. If it could be met, well and good; if not, they would be paid pro-rata - that is the cash and other elements would be paid in proportion to those seeking them.

As it happened, those with less than 60 per cent of the shares sought cash and got it. The group that ran into trouble was that seeking payment in the common, or ordinary shares. These were oversubscribed by a factor of two, so people would only have got half the shares they sought, with the balance paid in cash and special series shares E and F.

Most of this demand was down to institutions looking to replace Canada Life ordinary shares with Great-West Life ordinary shares, but some private investors were also caught out as they took most of their payment in cash but opted to take a small gamble on the ordinary shares of what is now Canada's largest insurer.

So what now? As you have discovered, the Irish stockbroking industry is unlikely to be chasing you for your business. In part, this is because the Great-West Life shares trade only in Toronto, complicating matters for Irish sellers.

But Great-West Life has organised an assisted sales plan for those holding a few shares and looking to get rid of them. This is geared solely at small investors - those holding 100 or under of each share type.

To do this, you need to fill in the form that came with your share information and send it off together with the share certificates (unless your shares are held electronically) to Computershare in Heron House, Corrig Road, Sandyford in Dublin. If you are confused about the form or the process, just call the freefone helpline 1800 523159.

The best part is that selling your shares in this way will cost just €32 per customer - a long way short of the €210 you are facing from the Dublin broker contacted.

The downside is that the assisted sales plan, as I understand it, requires the sale of all your small holding. That will work against those people who had opted to have a punt on the ordinary shares only to find themselves with a little bit of three different classes of share.

United Drug share split: I was confused by entries for the company United Drug on your markets page last week. Having stood at 14.20 on Saturday, July 19th, they fell to something a little over 2 the following week.

Personally I think it is unbelievable that the change is so big in one day. So the only excuse left is The Irish Times misprinted. Please let me know if I am wrong. Mr S.X., e-mail

Well, you are wrong but it is easy to be confused with such a big change in the share. What happened is that United Drug has had a share split in which it has issued seven shares for every one previously held by its investors.

As a result, naturally, the share price of each of the new shares dropped to one-seventh of the price of the original share.

This is not an unusual exercise. Companies will split shares for different reasons but, most commonly, it is because the price of the shares is too high.

If investors have €1,000 to spend, all other things being equal, they are more likely to want to spend it accumulating 500 €2 shares than 71 €14 shares.

It is simple human psychology - everyone accepts you are no richer whichever way you go but you feel richer with more shares.

In general, a company will start to consider a share split if the price goes above single digits - that is €10 or £10 or $10 - and shows no sign of falling back again.

Another reason a company might look to split shares is to make them more liquid - improve the level of trade in the stock. After all, a seven-for one split multiplies the number of shares in circulation by seven even if the company itself is worth the same.

Investors are more likely to trade part of their €1,000 holding in the above example if they feel it leaves them with a stake worth having.

As a matter of interest it is possible to reverse the process - issuing one share for, say, five or seven existing shares - although this generally only happens when the share price is ridiculously low and gives a less favourable image of a company.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.