Firstly, you don't need to do anything at all – and you will still be better off. But if you do want to participate, you need to lodge your application by 7pm on Friday, October 3.
For the majority of Telstra Corporation Ltd's (ASX: TLS) shareholders, doing nothing means that you will own slightly more of the company after the $1 billion buyback is completed.
In effect, Telstra's buyback will reduce the total number of shares, meaning each share will become a little bit more valuable. But the buyback only represents around 1.5% of the telco's total market capitalisation, so is unlikely to have a material effect on the share price.
For some shareholders, particularly those on zero or very low tax rates, such as pensioners and self-managed super funds, it may make sense to offer your shares under the buyback.
Telstra has even made available some tools and examples that shareholders can use to see how selling their shares under the buyback will affect them. You can get all the gritty details here.
Once you have gone through a quick verification process, you can even download an Excel spreadsheet that you can use to see the tax consequences of participating.
For those of you who want a brief summary, here's how the off-market buyback is being structured.
You can offer to sell some or all of your shares to Telstra
- At between a 6% to 14% discount to the market price, or
- At the final buy-back price.
To participate, you must offer to sell at least 925 shares or, if you own less than that, you must offer to sell them all. If you offer to sell more than 925 shares, you may also be subject to a scale back, meaning not all your shares will be bought back.
As payment, you will receive $2.33 as a capital component, and depending on the final price, the remainder will be as a fully franked dividend. The final price will be announced on Monday, October 6.
I can recommend having a read through Telstra's Buy-back booklet, (the table on page 20 has a number of examples at different tax rates) and downloading the spreadsheet.
As a Telstra shareholder myself, both in my personal portfolio and my SMSF, I'm doing nothing, preferring to hang onto my shares for the long term.
