Sharesies: The platform as a major shareholder in any company

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Forums › Finance and wealth management › Sharesies: The platform as a major shareholder in any company

OldGeek

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#285748 14-May-2021 14:34

As with many Sharesies customers, I am a newbie at share ownership. All shares I have bought are through Sharesies. I did own shares in Vector but this was the result of the privatisation of the Hutt Valley Electric Power Board and as a customer I was given 1500 shares.

Sharesies investors buy and sell shares, but these shares are held in 'blind trust' by Sharesies Nominees Ltd (SNL). Therefore in any one company, the total shares owned by all Sharesies investors are listed in the share register as owned by SNL. Therefore all shareholder communication from a company is solely to SNL. Apart from dividend notices, SNL does not pass on shareholder communications to the various Sharesies investors involved. SNL does not attend annual shareholder meetings (this has been confirmed to me by Sharesies) and presumably does not vote as a shareholder.

The question therefore arises as to what happens if SNL get to a point where their shareholding is a majority of all shares on issue (ie over 50%) or a major minority holding. While this is unlikely to happen, it is always a possibility.

Consider this example: SNL owns 40% of NZX-listed ABC. With SNL never participating as a shareholder, any other shareholder with at least 31% effectively has a controlling interest because they own a majority of the shares that SNL does not own.

What are the implications for ABC? Would this impact those investors that bought shares in ABC through Sharesies?

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#2707579 14-May-2021 15:07

The singular problem with your question, is that Sharsies Nominees Ltd doesn’t own the shares; instead it is a custodian of your ownership. You own the shares, not Sharsies.

So Sharsies Nominees will never own 40% of any company. Indeed Sharsies Nominees isn’t allowed to own even 1 single share in any company at all.

wellygary

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#2707583 14-May-2021 15:14

"What happens if SNL get to a point where their shareholding is a majority of all shares on issue (ie over 50%) or a major minority holding. While this is unlikely to happen, it is always a possibility"

By the time it happened SNL would have had to sort out some sort of proxy system to allow those that held through them to participate in any AGM decisions..

All Investors (which would include SNL) are required to declare publicly to the market once they hold a substantial share holding in any publicly listed companies on the NZX (similar rules apply to other exchanges) -the Threshold is 5%

So until SNL starts declaring it has more than 5% in anything relax because its not a concern,,

If they start declaring that they are a SSH (substantial share holder) then start to nag them about how they intend to exercise their rights at decisions...

I think I read somewhere that they were looking at ways to enable participation like this (or ways to register ownership in individuals names) in the future....

EDIT: changed sole reference to own to hold,

BlinkyBill

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#2707588 14-May-2021 15:27

wellygary:

"What happens if SNL get to a point where their shareholding is a majority of all shares on issue (ie over 50%) or a major minority holding. While this is unlikely to happen, it is always a possibility"

By the time it happened SNL would have had to sort out some sort of proxy system to allow those that owned through them to participate in any AGM decisions..

All Investors (which would include SNL) are required to declare publicly to the market once they hold a substantial share holding in any publicly listed companies on the NZX (similar rules apply to other exchanges) -the Threshold is 5%

So until SNL starts declaring it has more than 5% in anything relax because its not a concern,,

If they start declaring that they are a SSH (substantial share holder) then start to nag them about how they intend to exercise their rights at decisions...

I think I read somewhere that they were looking at ways to enable participation like this (or ways to register ownership in individuals names) in the future....

SNL doesn’t own the shares, and is prohibited from owning shares.

wellygary

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#2707591 14-May-2021 15:38

BlinkyBill:

wellygary:

"What happens if SNL get to a point where their shareholding is a majority of all shares on issue (ie over 50%) or a major minority holding. While this is unlikely to happen, it is always a possibility"

By the time it happened SNL would have had to sort out some sort of proxy system to allow those that held through them to participate in any AGM decisions..

All Investors (which would include SNL) are required to declare publicly to the market once they hold a substantial share holding in any publicly listed companies on the NZX (similar rules apply to other exchanges) -the Threshold is 5%

So until SNL starts declaring it has more than 5% in anything relax because its not a concern,,

If they start declaring that they are a SSH (substantial share holder) then start to nag them about how they intend to exercise their rights at decisions...

I think I read somewhere that they were looking at ways to enable participation like this (or ways to register ownership in individuals names) in the future....

SNL doesn’t own the shares, and is prohibited from owning shares.

But they hold on behalf of .. via a nominee company, (SNL)

but as the registered nominee they ( should they desire) could exercise the rights that come with that holding...

OldGeek

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#2707592 14-May-2021 15:39

BlinkyBill:

The singular problem with your question, is that Sharsies Nominees Ltd doesn’t own the shares; instead it is a custodian of your ownership. You own the shares, not Sharsies.

So Sharsies Nominees will never own 40% of any company. Indeed Sharsies Nominees isn’t allowed to own even 1 single share in any company at all.

The rights and wrongs of share ownership have been widely debated on the Sharesies facebook platform. Sharesies themselves have acknowledged that platform investors are not listed on any share register. Regardless of legalities, as Sharesies investors are not the registered owner of shares they cannot exercise shareholder rights - no voting, no invitations to annual meetings, etc.

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wellygary

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#2707594 14-May-2021 15:42

OldGeek:

Regardless of legalities, as Sharesies investors are not the registered owner of shares they cannot exercise shareholder rights - no voting, no invitations to annual meetings, etc.

Yeah, but the days of big flashy corporate AGMs are long gone :)....

These days you might get filter coffee and a biscuit if you are lucky .......

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boosacnoodle

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#2707595 14-May-2021 15:45

OldGeek:

The rights and wrongs of share ownership have been widely debated on the Sharesies facebook platform. Sharesies themselves have acknowledged that platform investors are not listed on any share register. Regardless of legalities, as Sharesies investors are not the registered owner of shares they cannot exercise shareholder rights - no voting, no invitations to annual meetings, etc.

This is false. Stake confers the ability for investors to vote and participate using exactly the same platform as Sharesies (DriveWealth).

BlinkyBill

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#2707624 14-May-2021 16:20

Sharesies Nominees Ltd is a custodial service and is bound by the rules and regulations of custodianship. Note that if you own Australian shares via Sharesies then there are no custodial services regulations covering these shares; and if you own US shares via Sharesies then the custodial services are provided by a non-Sharsies US custodial services provider.

It would pay for anyone using Sharesies, or any of the other businesses that buy and sell into a custodial arrangement, to understand what that means and what they can and cannot do relative to their share ownership.

I repeat in simple terms - if you buy shares via Sharesies then you own the shares, not Sharsies. Your ownership is held on your behalf by the custodian nominated by Sharsies, which is normally Sharesies Nominees Ltd but doesn’t have to be.

If you wish to wish to exercise shareholder rights, you will need to jump through a few hoops to organise that. I would suggest that if this of interest to you, then Sharsies and similar platforms are not the right vehicles to use.

BlinkyBill

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#2707627 14-May-2021 16:22

OldGeek:

BlinkyBill:

The singular problem with your question, is that Sharsies Nominees Ltd doesn’t own the shares; instead it is a custodian of your ownership. You own the shares, not Sharsies.

So Sharsies Nominees will never own 40% of any company. Indeed Sharsies Nominees isn’t allowed to own even 1 single share in any company at all.

The rights and wrongs of share ownership have been widely debated on the Sharesies facebook platform. Sharesies themselves have acknowledged that platform investors are not listed on any share register. Regardless of legalities, as Sharesies investors are not the registered owner of shares they cannot exercise shareholder rights - no voting, no invitations to annual meetings, etc.

I strongly suspect it’s been debated by people with scant knowledge of the subject.

richms

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#2707630 14-May-2021 16:26

I have moved to only using sharsies for my shares because of the amount of crap that I received when directly owning them, If sharesies doesnt shield me from being targetted with snailmail spam then it ceases to be useful to me.

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#2707639 14-May-2021 16:41

richms:

I have moved to only using sharsies for my shares because of the amount of crap that I received when directly owning them, If sharesies doesnt shield me from being targetted with snailmail spam then it ceases to be useful to me.

Public companies in NZ almost universally outsource their share registry operations to a registry company like Computershare or Link Market Services.

If you directly own shares, you will be dealing with the registry company and you can elect to electronically receive all communications from the companies you’ve invested in (and from the registry itself). As a result you can eliminate 100% of snail mail associated with your investments.

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mattwnz

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#2707680 14-May-2021 18:02

How hard would it be for them to have a voting form on each shareholding, and the majority is then voted for on behalf of all shareholders?

The problem I see is that there could be less accountability for companies if a platform like this becomes a very large shareholder. Although wouldn't the same apply for some of these ETFs?

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#2707738 14-May-2021 21:52

mattwnz:

1:

How hard would it be for them to have a voting form on each shareholding, and the majority is then voted for on behalf of all shareholders?

2:

The problem I see is that there could be less accountability for companies if a platform like this becomes a very large shareholder. Although wouldn't the same apply for some of these ETFs?

1: If I understand correctly what you’re saying, I think that would be an overwhelmingly massive and difficult piece of admin for Sharesies to do. They’d need to do that for every single investment security that they offer on the platform. Their fee structure and staff numbers would need to be very much higher to handle that. It would be a radical redesign of their offering. It may not even be possible or permissible under relevant legislation or regulations.

2: I realise this is not necessarily what you are saying but accountability to secondary (or lower) shareholders is not the problem of the investee company. IANAL but I believe that what a company can and can’t do with regard to shareholder voting is prescribed under the Companies Act. If Company A or the Trustee for Trust A own shares in Co B, Co B is required to consider only Co A and Trustee A - and does not need to (and can’t) look beyond those structures to consider the shareholders of Co A or the beneficiaries of Trust A.

If the shareholders of Co A or the beneficiaries of Trust A (eg. Sharesies’ investors) don’t like their lack of voting power in Co B, then they should reconsider their investment mechanism. Maybe find another structure that meets their criteria on accountability and voting rights - eg. direct shareholding. They might then pragmatically decide that the convenience and cheapness of Sharesies for small shareholders easily overrides their concerns about voting rights.

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mattwnz

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#2707755 15-May-2021 01:24

richms:

I have moved to only using sharsies for my shares because of the amount of crap that I received when directly owning them, If sharesies doesnt shield me from being targetted with snailmail spam then it ceases to be useful to me.

The problem is that they want to instead email it to you, which is even worse. Already overloaded by emails. Although you maybe able to turn it all off from inside the link market services, or computershare systems, whichever one is used by the company you invest in.

eracode

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#2707758 15-May-2021 04:57

mattwnz:

richms:

I have moved to only using sharsies for my shares because of the amount of crap that I received when directly owning them, If sharesies doesnt shield me from being targetted with snailmail spam then it ceases to be useful to me.

The problem is that they want to instead email it to you, which is even worse. Already overloaded by emails. Although you maybe able to turn it all off from inside the link market services, or computershare systems, whichever one is used by the company you invest in.

Not sure who you mean by ‘they’ - Sharesies or registry companies - but either way, sorry I don’t think that’s right.

I have invested in securities held through Sharesies. I don’t get any form of direct communication from the securities issuers and I am certainly not overloaded by emails from Sharesies.

I also have direct shareholdings in NZ public companies who use Computershare as their registry. All comms come by email and there’s no spam at all. Companies need to communicate with their shareholders to notify them of their annual result, send their Annual Report and to confirm dividend payments and so on. IMO this is important info that shareholders should want to receive - it’s far from being spam. And you’re saying you want to turn that off - that you don’t want to know what’s happening with your investments? Don’t want to know when they’re paying you money and how much?

If you turn off email comms within Computershare or Link, any companies you’re invested in will revert to snail mail because they are required by law to send you stuff. You can’t opt-out of this stuff and IMO nor should you want to - but whether you read it or not is up to you.

Direct shareholders might get four or six emails a year from each company. OK, if you’ve got ten holdings that may be 60 emails a year - but that doesn’t amount to spam. Anyone who considers that to be ‘overloading’ may want to consider whether they want to be invested directly - maybe go indirect with Sharesies and get little communication.

(I’m sort of defending Sharesies in a couple of recent posts here - despite being highly critical of them in posts two weeks ago on the subject of their portfolio return calculation methodology).

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