Shares

We have talked a lot on various threads abut the issues around raising funds through share issues, however, what about.........

1. Nominee accounts so that shares are held by a nominee rather than the owner. This means that the nominee gets one lot of paperwork for everyone rather than sending copies to all the holders. It also leaves the votes with the nominee - say the supporters organisation.

2. I was involved in the past with the Paddle Steamer 'Waverley' There were no publicly held shares in the owning/operating companies but in the past you could buy a 'lifetime' season ticket. So what about offering something that gave the travel privileges of a shareholder BUT without the shares for the life of the holder? It might be worth creating some shares to be held by the supporting organisation to represent the interests of the holders.

 

Why?

 

Because of the continuing costs that are associated with share issues, principally posting Annual Reports

 

But that maintains a link with the shareholder who may well make further purchases, donations and ultimately a legacy.

 

One of the ongoing problems for many groups is company shares are not usually “for the life of the holder” they are for ever. When the holder dies somebody else inherits them who may have no involvement in the loco or railway and no easy way to sell a small number of shares so may not bother to update the company. Therefore a number of companies don’t know the names or whereabouts of a growing proportion of their owners.

 

True but its an open ended commitment, and with the options I have suggested you still have the address of the 'donor' so can still contact them, bit are not committed to it forever.

 

If this is something you're concerned about, you can always put any shareholding into a nominee account yourself. Find a financial services firm or a financial advisor who can set up a general investment account which accepts any sort of asset within its wrapper, and tell them you'd like to place some unlisted shares you already own into the wrapper. I used to work for a firm which offered exactly this service (through IFAs rather than retail) so I know it's straightforward.

If you want shareholder travel benefits on a more limited basis, why not purchase lifetime membership of your favoured railway (or its supporting body) instead.

If you just want to donate a large lump sum and aren't in it for the benefits, the most efficient way to do so is to donate it to a related charity, if one exists. If your favoured railway doesn't offer efficient donation mechanisms, you may want to ask them why not

 

You seem to be creating a solution for a non existent problem. It doesn't cost much to post out a set of accounts once a year.

 

There are many many people listed on the WSR list of shareholders whose investment amounted to £5. How many sets of accounts do you think you can post before that investment has been wiped out?

Tom

 

How do you know that they have made no contribution in the meantime?

 

I don’t. But the question is about shareholding, and demonstrably shares are an expensive way to raise capital. Plenty of comparable organisations - not just heritage railways - successfully raise large sums of money and retain good contacts with their donors without using shares.

Tom

 

Thats the point I am trying to make, what can be done to raise money without the expense of a share issue

 

The last SVR share issue raised £2.6m in short order- how would your Bluebell Railway raise that sort of money?

 

The SVR has raised over £10 million pounds by way of share issues - I'm guessing that you've not contributed anything like that amount to appeals etc?

 

Via the Bluebell Railway Trust as donations.

Tom

 

Has that raised £2.6m in short order? In addition to share purchases?

 

Over £1m per year for the last 6 or 7 years, with lower than 1% costs (ie > 99% available for the objectives).

Tom

 

For a proper comparison you need to look at the Severn Valley Railway Charitable Trust as well as the Share sales. I think that you'll find that Charitable donations and legacies benefit the railway as well as the share sales which exceed £10 million.

Your Bluebell Railway has a peculiar organisational structure so that you cannot sell shares, but other railways have made it work very well.

 

It’s not true that the railway cannot sell shares; in fact there was a share issue roughly twelve years ago. The restriction is that the membership society has to retain a majority shareholding. One way it achieves that is to loan money to the company and periodically convert the loan to shares.

None of which changes my view that over a long period, the cost of fundraising through shares is relatively expensive. Hence my comment about the large number of shareholders who invested £5 in the WSR, but technically still represent a compliance cost for the company, probably decades after they made their investment.

Tom

 

Well that's a WSR problem- they made a foolish decision to sell shares @ 10p each. However, it does not change the basic fact that many railways have raised significant sums of money by way of share issues.