What to do with B&B's windfall

By DAILY MAIL REPORTER
Updated:

 

More than 2.7m Bradford & Bingley customers will soon have to decide whether to keep or sell the shares they're being given when the former building society becomes a bank in December.

Mailings are now being sent to all those in line for shares - and these documents should not be ignored. You must fill in the forms and return them, whether you want to keep the shares or sell them straight away and take the cash instead.

Because the B&B decided to give each qualifying member the same number of shares, there's no checking of balances required. Instead, each qualifying borrower and saver will get a flat entitlement of 250 shares.

How much these shares will be worth won't become apparent until the day they start trading - expected to be 4 December. The estimate from B&B's brokers is that a package of 250 shares will be worth between £647 and £815 - a mid-price valuation of about £730.

Now B&B shareholders have to decide whether they want to hang onto the shares or take the cash equivalent instead. The disadvantages of keeping the shares are that you'll have a relatively small number that will cost money to sell in the future. And if you haven't held shares before, you'll have to get used to fluctuating share prices.

Holding a single company's shares is risky: far better, if you're a first-time investor, to take the B&B cash and use it to buy a unit or investment trust. But the advantages of hanging onto the shares are that you should get a regular stream of dividends as well as, hopefully, capital gains.

At the moment, the share prices of other mortgage banks - such as the Halifax - are depressed. If this continues, then B&B could be similarly dragged down - so potentially, it may not be a good time to sell. And, of course, B&B could be taken over by a bigger bank, so there is a possibility of another windfall.

If you want to keep the shares, you should fill in the blue Keeping Your Shares form. Sign and date it and send it back in the reply-paid envelope by 24 November.

Just after the float in December, you will get a confirmation of your shareholding, which will be held in a nominee account. After flotation, you can opt for a share certificate if you wish. If you want the cash, fill in the yellow Selling Your Shares form and sign and date it. If you sell your shares at conversion, then your shares, and those belonging to other B&B members who also choose to sell, will be bulked together and sold at auction.

You will be sent a cheque for the proceeds - minus a £10 charge - on or about 11 December. The advantage of taking the cash is that you get away from holding a few shares and you have the cash - either in time for Christmas or to invest elsewhere.

The disadvantage is that as your shares will be bulked in with others, you may get a lower price than that which B&B commands when it starts trading. Added to that, you may end up with a capital gains tax bill if you've made other gains in this year. Whatever you do, don't fill in both forms. You must take either the cash or the shares: you can't split it. And you must make sure you keep your account open until midnight on completion day - 3 December, 2000 - otherwise you risk losing your entitlement.

Graphic designer Margaret Wilson, from Edinburgh, pictured, has been a saver with Bradford & Bingley for four years - and is in line to get the standard 250 shares on conversion.

She says: 'I haven't decided whether to sell or to keep the shares yet. The money would certainly come in handy because I'm trying to move house at the moment, but I think I'll hold onto the shares for a few months and see how they perform before I think about selling.'

Most watched Money videos