CASH PAYMENTS TO investors in Eircom shares have started arriving, but the stock’s poor performance since it was originally floated mean that punters are still shipping a loss.
Personal finance expert John Lowe of moneydoctor.ie said that the losses were so serious Revenue Commissioners had decided in January not to tax the income from the shares.
“(Investors) lost money and hence the revenue aren’t after them for capital gains tax…at one stage you were down to 33 per cent of the investment. It has gone back up, but it’s not brought it back to the level where they’re up on the deal.”
The cash payment was prompted by a decision from Vodafone-who became the ultimate owner of the Eircom shares-to sell out some of its US interests to cellular giant Verizon.
How did this happen?
Lowe said unfamiliarity with the stock market had led many rookie investors to make poor decisions.
People bought these shares as a gamble and even though they could have cashed out and made a profit, most chose to stay in thinking the share price would inexorably rise…the greed factor kicked in and they are left hoping they will rebound. Today that rebound has happened but it still has not made it a profitable exercise
The cash payments landing on investors’ doormats represented a total of 20 per cent of their holding, with the remaining 80 per cent now converted into Verizon shares.
“They can keep these (Verizon shares) or they can cash them out without stockbroking costs as per the original prospectus.”
A total pot of €64m will be shared among the original investors, fifteen years after Eircom originally went private, prompting mass investment by ordinary Irish people with no experience of shares.
Low said that this kind of once-off amateur investment in a single stock is a risky business:
“Individualising stock selection can be a mug’s game. Diversification, balanced portfolios, spreading your risk are all part of the strategy.”
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