Severn Valley Railway to launch £4,000,000 share issue.

It's £3m, the original poster used a figure (which had been mentioned elsewhere as the maximum figure allowable under the Enterprise Investment Scheme), the Share Offer is for £3m.

In terms of "struggling" I keep for my own information a 7-day rolling figure, where possible, from numbers posted up on the SVRA forum and it seems to be bearing up:

7 days ending 2 Nov = £10,449 a day
7 days ending 8 Nov = £6,507 a day
7 days ending 15 Nov = £6,554 a day
7 days ending 22 Nov = £9,122 a day

(To put it in context, it would need to maintain £6,745 per day until the one-year date to reach £3m! Still a way off.)

Tomsquared earlier in the thread mentioned how Bluebell raised funds and how much was raised thrugh shares, IIRC the share money element was less than the SVR has so far raised (though it obviously raised other money very successfully - no offence intended).

I'm no part of the Railway other than an ordinary member/shareholder/volunteer, but I don't think the railway's future is bleak. Challenging yes, and it will be for some time, but it has some good news to tell as well.

Now, where's that lottery ticket?

Patrick

 

None taken. BTW, I quite like "tomsquared" :smile:

It was about £700k raised in the first initial "burst" (from a smaller target - £1.8million); since then money has trickled in through the deferred purchase scheme (basically a scheme that allows BRPS members to by the minimum £250 subscription in monthly instalments rather than all at once); it will probably take about 10 years now to raise the remaining £1million or so via the eventual conversion of BRPS membership fees into shares.

Two things strike me about share issues in general, and the SVR one in particular.

The first is minimum subscription. We chose £250; the SVR has chosen £100 which maybe helps explain why it seems to be more successful, as it brings more people "in to scope" who can potentially afford it. However, the downside is that the administration of shares, especially over a long period, is quite expensive: you have to keep records, send out a notice of AGM and accounts, and so on, for year after year. If you are not careful, the administration can wipe out the income over time. I'm sure the SVR weighed up the pros and cons of a higher or lower minimum subscription (maybe basing their decision on ours experience); but I do wonder if the minimum is really too low.

The other is what is the best balance between donation, shares or membership? In our case, if you had, say, a spare £500 in your pocket, what should you do? You could join as a life member, for which you get free first class travel for life: for anyone not a life member, that was actually the option most in your own interest. The money goes to the Society. Or you could give the money to the Trust: you get nothing in return, but the railway can reclaim GiftAid. I think this is the best option for the railway overall (because of the GA). Or you could buy shares, for which you get some benefits, and the money goes to the PLC. It does strike me that trying to get people to provide funding via shares (rather than just a straight charitable donation) is a more expensive way of fundraising for a railway; I wonder what the advantages are that make it an attractive option? Maybe an accountant can comment!

Tom

 

£100 is, I'm pretty sure, the minimum amount needed for shareholders to receive benefits from the shareholding. So it that way it makes sense for new shareholders to start at this amount.

 

To try and answer Tom without getting too technical, I am not sure an accountant would find a "straight" share issue attractive and yes, Gift Aid is the most attractive to the recipient!

With Gift Aid, the recipient (lets assume a Railway for our purposes) gets an extra £1 of Gift Aid for every £4 donated. Higher Rate Taxpayers get the same, Basic Rate Taxpayers no relief and extra rate a bit more tax relief. Gift Aid is now unique in that you can "set back" a payment made in one tax year to the previous one, which can be useful!

There are tax reliefs potentially available on share investments, but these all go to the investor and none to the Railway. There are also some reasonably strict rules which need to be complied with to get them and much of the compliance would fall on the Railway. Nevertheless, I believe the SVR Share Issue does seek to provide investors with these Enterprise Investment Scheme reliefs.

Starting an Appeal with Gift Aided donations requires no approval, assuming that you are a qualifying body for Gift Aid. The professional and legal; fees involved in a share issue will run into £10,000s and could even reach 6 figures, despite attempts at some exemptions and deregulation.

So, as Tom says, why bother with share issues?

Well, I suspect in many cases it is because a Railway either has no organisation that can claim Gift Aid in its structure, or the structure means any money a qualifying organisation raises is in the wrong place for the need for expenditure. A charity cannot simply pass on money on which Gift Aid has been claimed to a PLC to spend on the PLC's Railway. The question clearly arises "why does the PLC own the railway then" but many structures were set up years ago, possibly before Gift Aid in its present form, and can be very expensive to change.

I think also that the many Railways see Shares Purchased as basically the same as donations misses the fact that the investors probably do not. Becoming a shareholder makes them a "part" of the Railway, literally an owner. They do get benefits not limited by the rules on Gift Aid - indeed, the face value of these can often exceed the investment and they are generally not taxable! A straight donation (as opposed to Gift Aided membership, if this qualifies for Gift Aid) gives no "ownership" or return. The theory must, therefore, be that people will spend more on shares, perhaps effectively as an "advance purchase" of the benefits received, than they would willingly donate. There is also perhaps a feeling that existing shareholders, if they feel well treated, will "top up" holdings at each share issue. also, share ownership was very much "the in thing" in the 1980s.

Finally, the high profile success of a share issue on one line will lead others to assume a similar success - and the SVR has probably raised more overall from shares than anyone else.

This is somewhat of a simplification, but I suspect we will see more share issues despite the cost of preparing them and the lack of tax breaks to the Railways in question.

Steven

 

I'd suspect that is convention, not statute though. In other words, (and assuming the SVR structure is comparable to the Bluebell structure), the shareholder benefits have to be decided each year and are in no ways guaranteed - just the same as a the way a dividend is set on a normal share, to which they are analogous. So by convention it may be that the SVR has set a lower limit of £100, above which benefits are paid. But I doubt that that prevents them from raising that threshold to any higher figure they choose. We have shareholders from previous issues with holdings as low as £50; I assume they just get no "dividend" unless they increased their holding to at least £250. And the PLC are also very careful in stating that they are setting the benefits for this year; next year might be different.

As Steven notes, at face value they are quite generous. For £250, for the last few years you have got two third class day rover tickets redeemable within the next year; face value (to a non-BRPS member) of £27. Not a bad annual return for a £250 investment...

Tom

 

Thanks Steven for that reply. The bit about a charity not passing on money to the PLC rings true - I think in our case, it was felt that building an entirely new railway wasn't quite in keeping with the charitable aims of the Bluebell Trust, which are about heritage and preservation, and that influenced the decision to go for shares. Subsequently, we found a way to keep everyone happy that what we were doing was within the remit of the trust, which is why subsequent fundraising has gone through that umbrella, with the concomitant GiftAid advantages. We also have a structure that more or less guarantees that the shares will be fully subscribed in time, though not necessarily very quickly.

Interestingly though, in our current draft Long Term Plan, there is a statement to the effect that we will review our current structure to see if it is still fit for purpose; and I believe a lot of the reason is that it is currently difficult for the Trust to raise money for essential PLC repair projects, even though in effect both bodies should be controlled by the Society - which is the ultimate owning and decision making body. So in some sense the structure prevents the Society obtaining what it wants in a cost-effective manner. As you say, share issues were the in thing for the 80s/90s, but maybe they will decline in importance and charitable giving become more important.

Tom

 

Sorry Tom - I conflated your real and posting names. I promise not to call you James and Tomsquared!

Great posts.

The SVR is like this, for historical reasons going back to the 1960s:

The railway is owned (and more recently run) by the PLC, a shareholder body. There is no tax relief or gift aid on the shares EXCEPT this Share Offer has been issued under the Enterprise Investment Scheme which gives a 30% taxback to tax-payers (you pay the 100% and claim back the 30% - I got my form this week).

100 shares gives one free ticket (turn up on the day adult - £17) with 225 (2 tickets) and 400 (4 tickets) being the next 'bands', and so on, not taxed.

At a public meeting a higher minimum purchase figure was mentioned and in my feedback I commented that some supporters would struggle with a high minimum. The Share Offer figure of £100 is lower than that first mentioned, but I don't know how it was arrived at.

It not being charitable, fares/entry fees are not gift-aided

(As an aside a fellow member/sharehoder/volunteer said to me yesterday that those who disagree with something are those that should buy shares, so they can vote and affect the outcome, rather than withhhold it. Just a thought).

Members are members of Severn Valley Railway Company Limited, a "guarantee" company without shares. Until recent years it ran the trains, but now is a members' body which supplies the volunteers. It is a large shareholder (over 20%) in the PLC and often uses surpluses from membership fees to buy shares (new and secondary market), so that its shareholding has increased from 751,859 (31.12.06) to 1.3m (31.7.12) - this is I think similar to the Bluebell arrangement Jamessquared described. It not being charitable, memberships are not gift-aided

There is also The Severn Valley Charitable Trust (lately the SVR Rolling Stock Trust) to which one can donate and claim gift aid. It cannot buy shares in the PLC: again this is I think similar to the Bluebell arrangement Jamessquared described.

(There is also the Severn Valley Railway Association but let's not confuse matters!)

I would be interested if one could construct a structure whereby the PLC owns the railway and leases it to the Charity, the members are members of the Charity and so claim gift aid on their dues and donations, and the Charity sells the tickets and so claims gift aid. That is, I think, for another thread!

In the meantime, please buy early and buy often! Severn Valley Railway - Shares Issue

Patrick

 

The one thing that strikes me as interesting in the SVR structure is that the members' body only has a minority shareholding in the PLC. Obviously, it depends where the assets are held, but doesn't it make it at least feasible that a wealthy person could stage a takeover of the PLC without the support of the members' body? Whereas in our case, the BRPS always maintains a majority shareholding in the PLC (currently about 72% I believe). So although the PLC owns the assets, particularly the engines, in practice it is controlled by the majority shareholding in the BRPS, and since the BRPS is "one member, one vote", it is not easy to stage a hostile takeover. Though it does limit the size of any share issue, since the PLC can't issue so many shares in one go that could lead to a theoretical dilution of the BRPS shareholding to below 50% - even if it thought it could sell them all to raise capital.

In practice, each year any BRPS surpluses (which tend to be substantial, because the income is all the membership fees, but the outgoings are very little) are loaned to the company, and periodically these loans are exchanged for shares to re-inflate the overall shareholding. Hence my comment above that the remaining £1million or so that was unsubscribed will eventually be subscribed, but it might take a few years.

Tom

 

Yes

To do so they could either:

(a) make an offer for the shares in circulation and pick up 2.9m non-SVR owned shares (67% of those out there) or
(b) turn up with a cheque for £2.2m for the unissued share capital which would give them around 27% of the enlarged company. They'd then have to persaude the holders of 1.8m of the 4.4m non-SVR owned shares (40%).

Many non-SVR owned shares are owned by the members individually.

IIRC a change in control of the PLC could lead to the HLF requesting repayment of grants it gave for the carriage shed and Engine House, something around £6m in the accounts!

All unofficial and all numbers approximate

Let's just say it would be difficult

Patrick

 

Yes, I guess largely a theoretical risk.

Will be interesting to see how long your weekly totals keep up. I never recorded how ours tailed off, but by memory it was about 3 months (*), i.e. after that share purchasing largely died down and other fundraising really kicked in. Even if the SVR share issue is fully successful, it still leaves £7m to find

One piece of advice (borne of experience!) I'd give for casual onlookers, and especially us keyboard warriors: you have to give the fundraising team some credit that they know what they are doing! In other words, there will be times you don't hear much happening, but it may well be that there is a careful strategy in place and delicate negotiations taking place. Willful speculation of the "what's happening; why didn't you update us on how many envelopes you opened since yesterday?" isn't necessisarily helpful, and at worst diverts attention from the task in hand! Some level of oversight from members and donators is correct, but be careful not to throw the baby out with the bathwater!

Tom

(*) But that was memory from something that happened about 4 years ago, so may be a faulty recollection.

 

Methinks the long radio silence from Tigger has come about for two reasons: -

a: a gagging order being placed
b: so many adverse comments have been made about the original uninformed design they've gone away for a complete rethink.

From the SVR site it appears the only two individuals that may divulge updates now are the GM or PM.

 

Well you are wrong. It has been stated on the SVR site that no further public announcements would be made until the share issue has reached £1,000,000.

 

Whilst its true that the SVR has announced there will be no further announcements until the first million pounds is reached. It is equally true that there has been no announcement on the current thinking on the Bridgnorth redevelopment. Is this because of a re-think, or because the published plans are still considered suitable for a Heritage site ?

Which ever of the two positions is correct, it is clear that some form censorship is in place.

 

There are two quotes from Tigger on different threads, repeated here for clarity:

"from the SVR head office:

TO DATE: 27/11/12 - £915,033

So that we maintain ‘Radio Silence’ concerning when the Share Offer reaches £1,000,000 we will not be advising of the daily or up-to-date figure for a few weeks.

This will then enable us to get the information to the press before it appears on any Social Media sites.

Thank you for your understanding"

And:


"Sorry for the silence:

"The results of our work will be communicated through and authorised by either myself or Paul Taylor who has been appointed as Project Manager for 'SteamWorks'.
Nick Ralls
General Manager""

Patrick

 

Go to SVR Live, open up Steam Works and read November 2012 Update. It does explain what is happening.

 

std tank. I assume that the reference you give is the one where the GM states 70% support for Steamworks - a figure that is somewhat open to debate as being economical with the reality.

I also understand that some financial aspects of the Bridgnorth redevelopment proposals must remain confidential. That the Bridgnorth estate needs investment is also accepted and not in question.

What I do not understand, is that no further public statement has been made following discussions with the 'planners' on the current state of the proposals. If the SVR are to persuade me that a share investment will bring something positive to the railway, then this badly managed and unfortunate saga gives one little confidence. Why are members and shareholders being asked for support, whilst at the same time being kept in the dark about how their money might be spent. I guess die hard supporters are happy with the situation - they just want to help the railway. Others like myself will only hand over our hard earned cash when we are clear how it is to be spent.

I should make clear, even if this might seem unlikely, that I am a supporter of the SVR, but at present my chequebook remains firmly closed.

 

gios, no it is not that one. it is a later update.

 

I went to the consultation - I said I supported improving Bridgnorth, but I didn't support the specifics of the proposed development - does that make me part of the 70% or the 30% ?

 

The lates update I could find is dated 1 November, even though it is contained in a news section dated 29 November - is that the one you mean?

 

From what I can gather I think we can look forward to updated plans in February. Which suggests lots of alteration. Which suggests...?

I think Michael you may well be one of the many. Most people I have spoken to have said 'good idea...good use of the space...hate the buildings'. Broadly, I personally would subscribe to that. The devil is in the detail.