15 October 2008
What is the difference between Royal Dutch Shell ‘A’ shares and ‘B’ shares and which is the best for small investors to buy? R.F., Baku, Azerbaijan
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| Shell: I’m confused by the two share prices. Where should I put my money? |
Spencer Winfield at stockbroker Charles Stanley replies: Royal Dutch Shell ‘A’ and ‘B’ classes are identical with the exception of their taxation treatment on dividends.The ‘A’ shares are subject to Dutch withholding tax of 15% so should in theory trade at a discount of around 4% to the ‘B’ shares.
However, for the past 12 months or so they have in fact been trading at a premium.
This anomaly can best be explained by looking at the company’s share buy-back scheme.
When buying back stock for cancellation, Royal Dutch have tended to buy the ‘A’ shares and this has created a greater demand for the ‘A’ shares and artificially pushed their price above that of the ‘B’ issue.
For UK investors the ‘B’ issue is the preferable line, especially as it presently stands at a discount.
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