Help! I'm stuck with dead shares

By MICHAEL CLARKE
Updated: 06:38 EST, 18 August 2006

WHEN holiday operator Parkdean's management proposed a buyout of the company, shareholder Richard Stones didn't know whether to accept.

Richard, who works in the travel industry, decided to hold fire and review his investments before making a decision

But when he missed the deadline for acceptance, he was shocked to discover he had become what most investors dread – a de-listed shareholder.

He said: 'I have a share dealing account with the Halifax and was given the option to accept or not. I decided I wanted to think about it, but by the time I logged into my account again the deal had gone through.'

In most mergers, acquisitions or management buyouts, the company will snap-up all minority shareholders' stock on a compulsory basis. However, there is no rule that they have to do this and in some cases, where shareholders don't accept they can be left with their shares but with no market on which to trade them.

Companies listed on the FTSE 100 can apply to delist if they hold more than three quarters of their own shares, while those on Aim can delist if a shareholder owns more than 50%.

So far this year, 42 Aim companies have come off the market as a result of merger, acquisition or liquidation.

Roger Lawson, communications director for the UK Shareholders' Association says delisted shareholders have few rights. 'The company still has to keep them informed and has to pay them a dividend if one is awarded, but their voice is diminished. The company directors can basically do what they like even if the shareholder disagrees.

'But the worse thing is that the shares are nearly impossible to sell.'

Lawson says investors should reduce the chance of this scenario happening to them by responding to all communications they receive from the company.

He says: 'It's typical for only 30-40% of shareholders to respond because they are either apathetic, don't understand what they have received or the communication is being sent to the wrong address.

'Companies only need 75% of those people who respond to vote in favour of a motion for it to be passed, so it's important to reply if you have a strong view.'

Gavin Oldham, managing director of The Share Centre, an online stockbroker, says shareholders left stuck with worthless stock should approach the company secretary.

He says: 'If you have purchased your shares through a nominee account then speak to the stockbroker to see if they can sort it out on your behalf, but if you own the share certificates, approach the company yourself.

He adds: 'To be honest, companies don't like to have lots of small shareholders on their books because it is a cost to manage them.'

Richard Stones owned £4,500 worth of Parkdean shares He contacted his broker, Halifax, which managed to get the offer extended so small shareholders stuck with the shares could cash in.