Fortress Real Estate Investments Limited (Fortress) recently made an announcement regarding a cash payment in terms of a capitalisation issue for fractional entitlements. This move has significant implications for shareholders, particularly those holding Fortress B shares. Let’s delve deeper into the details to understand the intricacies of this financial manoeuvre.
Background on Fortress Real Estate Investments Limited
Fortress Real Estate Investments Limited, incorporated in the Republic of South Africa, is a prominent player in the real estate investment sector. With a strong presence and a JSE share code of FFB, Fortress has been a key player in the market.
The Capitalisation Issue and Cash Payment
The recent announcement by Fortress pertains to a capitalisation issue involving a cash dividend of 81.44308 cents per share. Shareholders were given the option to receive new fully paid-up Fortress B shares instead of cash, based on their shareholding as of the record date, set at Friday, 12 April 2024.
Calculation of Capitalisation Shares
The reference price used to calculate the number of capitalisation shares per eligible Fortress B shareholder was set at 1 410.99122 cents per share. This price was crucial in determining the allocation of new Fortress B shares to shareholders who opted for this option.
Treatment of Fractional Entitlements
One interesting aspect of the capitalisation issue is the treatment of fractional entitlements. Fortress ensured that shareholders would not receive fractions of new Fortress B shares; instead, any entitlement to a fraction was rounded down to the nearest whole number. The value of the fraction was then paid in cash to shareholders, albeit subject to dividend withholding tax at a rate of 20%.
Calculation of Cash Payment for Fractional Entitlements:
To understand this better, let’s consider an example. Suppose a Fortress B shareholder held 100 shares at the record date and opted for the capitalisation shares for their entire holding. According to the finalisation announcement, they would be entitled to 5.77205 new fully paid-up Fortress B shares. The cash payment for the fractional entitlement would be calculated based on the volume weighted average price of a Fortress B share traded on the JSE, discounted by 10%.
| Shareholder Holdings | Number of New Shares | Gross Cash Payment | Net Cash Payment (20% Dividend Withholding Tax) |
|---|---|---|---|
| 100 shares | 5.77205 shares | 1 031.60934 cents | 825.28747 cents |
Conclusion
Fortress Real Estate Investments Limited’s cash payment in terms of a capitalisation issue for fractional entitlements provides shareholders with a strategic choice between cash dividends and new fully paid-up Fortress B shares. The company’s meticulous calculation methods and consideration of tax implications demonstrate its commitment to transparency and shareholder value. Shareholders should carefully evaluate their options and consult with financial advisors to make informed decisions regarding their investments in Fortress.
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