Consolidations are made easy with Sharesight as we fully automate them for you in your portfolio. To understand what a consolidation exactly is and how Sharesight automates them for you, have a look below.
Key points handled in this topic:
- What is a consolidation and what is the process behind it?
- What is a deferred settlement period?
- What effect does this have on the shares I own?
- Will Sharesight automate the consolidation for me in my portfolio?
- When will the consolidation be visible in Sharesight?
- How long will I have to wait until my main share holding has price updates again?
- What if I have purchased shares whilst the company is in the deferred settlement?
- Where can I find examples of how other clients handled complicated consolidations?
- What if my main share holding has an out of date price currently?
A consolidation is a corporate event where a listed company merges (consolidates) its shares in some pre-defined ratio, e.g. 10:1. A share consolidation is the reverse of a share split which increases the number of shares in some pre-defined ratio, e.g. 1:10. The market price for the shares will naturally adjust such that the market value of the shares does not change (all other things being equal). A consolidation or split does not alter the cost base of the holding. The reason a company would implement a consolidation is because it may feel that is per unit share price has become too low, perhaps because the share price has dropped dramatically for some reason.
During the process of implementing a consolidation a company might go into a deferred settlement period that usually lasts between 1-3 weeks. A Deferred Settlement is a period in which the obligation to settle on a trade date plus three (3) business days (T+3) basis is deferred until the time following the end date that the exchange it trades on has decided on. In other words, the company starts trading temporarily under a new share code. Typically, this is the original code + DA at the end for example AHZ becomes AHZDA.
Please remember: Once the settlement period is over the holding starts trading under its main share code again so AHZ rather than AHZDA.
The shares you own under the original holding will not have price updates once the settlement period begins. The price will be updated again when the deferred settlement period has ended. The reason for this is that the original holding now trades under the DA (deferred settlement) code, AHZDA.
Typically Sharesight handles consolidations without issue. However, please note that Sharesight creates the consolidation adjustment on the date that the consolidation takes effect (action date). Once the consolidation has taken effect in your portfolio the shares will no longer trade on a deferred settlement basis and you can soon expect price updates again.
The adjustment transaction for the consolidation will be recorded on the action date. However, the consolidation ratio will appear in the Corporate Actions sidebar as soon as the consolidation is announced. In the screenshot below there is an example of where this occurs as far as a month before the consolidation is actually due to take effect. This is our way of informing you a corporate action is on the way!
To view the corporate action sidebar go into the holding > scroll down > click Corporate Action > click Consolidation like the example below:
During the 1-3 weeks that the holding is under deferred settlement there will be no price updates under the main share code. There will only be price updates for the DA (ANZDA) code in that time as this is the code ANZ is currently trading under.
What can I do if I want to see price updates now, is there a workaround?
What you could do to get price updates is use the share checker function (see screenshot below) to check the prices for the deferred settlement share code. Note that these prices will be quoted as if the consolidation has taken effect. Therefore, divide the price update by the consolidation ratio in order to compare it with your previous buy or sell trade prices.
Find the Share Checker > Middle right hand of the page > next to Add Holding:
Find the deferred settlement temporary share code after clicking > Share Checker:
The best option would be to record the new purchased shares under the main share code since the DA code is will revert back to the main share code. This will save you work later on.
Note: Please remember that the price and quantity of your newly purchased shares assume that the consolidation has taken effect already. Therefore, you may need to adjust this accordingly if your trade is dated prior to the consolidation action date.
The Sharesight Forum is a great place to start! For example have a look at how these clients handled the following consolidation that involved partially protected shares: WES/WESN partially protected shares. Should you not find your consolidation and it is a tricky one please feel free to leave a message as a question in the forum and we’ll make sure to help you along.
The price will update as soon as the deferred settlement period has ended and the shares are traded under the main share code again. As mentioned before please note the deferred settlement period might take between 1-3 weeks.
Visit the Corporate Actions page for more corporate action advice, including instructions on how to handle popular corporate actions.
Keywords: merger, mergers, company event, automation, calculation, price fluctuation, support, resistance, two businesses merge, short term traders, volatility, combining of assets, consolidated, consolidated number, portfolio value, capital gains, figures
Last modified on April 19, 2017 UTC