WOW demerger - EDV entitlement

Products SPA3 Investor
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SPA3 Investor members holding WOW shares in their portfolio may or may not be aware of the current demerger of their drinks/beverages business which is being spun off as a newly listed company EDV.

Members holding WOW at the close of Today’s trading Friday 25th June are entitled to shares in EDV on a 1: 1 basis.

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Normally in these situations there would be a trading halt whilst this spin off transpires, upon which we could then decide on the necessary course of action.

WOW however continues to trade and as a result of the demerger has dropped in price and subsequently produced an exit signal. (The drop in price reflecting the approximate value of the EDV share value)

Whilst the Sell signal in WOW means that WOW should be sold during today’s market hours, it would also mean that the investor would NOT be entitled to the EDV shares from the demerger, therefore losing out on the “value” in that part of their current WOW holdings.

In lieu of this, the Public Portfolio will continue to hold WOW after the market closes today to ensure that the EDV entitlement is captured.

EDV shares should be appear in brokerage accounts shortly, depending on your platform. EDV shares will start transacting on the market on Thursday July 1.

On Thursday 1st July, EDV will be sold from the public portfolio.

Once shares of EDV appear in the public portfolio as per the entitlement, the remaining open position in WOW will be closed. (Unless in the meantime it has moved to an open position once more and then the position will remain open)

Please note this is not financial advice, but rather a communication of the Public Portfolio’s actions in this situation.

2

Are you sure? The table above says the ex date was yesterday. On the basis you are right, I should buy more today to get the EDV entitlement on Monday.

3

OMG…i sold WOW on the Open this morning x 930 shares @$27.99…as I believed trading today was Ex Bonus Shares??? Does this mean I need to buy them back today to get the entitlement to 930 EDV Shares??

4

Wish this post had come out a little earlier. Sold my WOW shares on open today via ATRTS.
However, I’m with Saxo and the EDV allocation seemed to be put into my portfolio yesterday the 24th and they are still in my portfolio.
I’ll be annoyed if I’ve sold WOW too soon.

5

WOW Shares today are Quoted XB and according to Commsec the definition is as follows:

XB = ex bonus issue XB displays for a security from the morning of the ex bonus date (generally one business day before the record date) and remains until the close of trading on the bonus issue date. Trading in a security displaying XB on ASX Trade does not carry the right to receive the bonus issue. For more information refer to the description of cum bonus. All orders are purged at the end of the trading day prior to the security being quoted on an XB basis.

Is it possible to confirm?
My understanding is that if WOW shares are bought today they do not include the EDV Shares

6

I also sold our WOW shares this morning on the basis of the sell signal. This information would have been helpful earlier. Can we now confirm the true situation re the entitlement? Preferably before close of trade today.

7

I sold my WOW also this morning but had via Nabtrade the EDV shares already allocated in my portfolio. After then discussing with SWS, I have now also sold my EDV shares, so trust all good in the end!

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I called CommSec just now to confirm the situation about WOW and the Bonus EDV Share allocation.
They confirmed that if WOW Shares were sold today (Friday 25th June) they are Sold Ex EDV Bonus Shares and they would be allocated on or by 1st July.
Wednesday 23rd June was the last day they would be sold without being entitled to the Bonus EDV Share entitlement according to CommSec

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I also just noted on the Sell Confirmation from Nabtrade that there is a deferred settlement until 5 July!

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Damien et al,

One of the SWS team called the Woolworths Share Registry Hotline on 1300 420 545 this morning. The person on the other end was fairly cagey (probably uninformed), finally admitting with further questioning that the Record Date is 7pm tonight.

We are still unsure what exactly that means but probably that that is when the allocation of EDV shares will be finalised according to the qty held on Wed 23rd June.

IMHO this really is a confusing and poorly handled Demerger. As David mentioned in the post above, similar Demerger scenarios in the past has seen the underlying stock suspended from trading for a day or a few days.

EDV can be bought and sold today as a stand alone stock on broker platforms.

It appears that some platforms are still not seeing the allocation of EDV (eg Self Wealth), or if the allocation can be seen, can’t place a Sell Order to sell the allocation (eg SAXO).

Whilst there is some confusion in brokerland, in the table issued in the Demerger Booklet and with the Hotline, it appears from recent Member forum posts that NABTrade and Commsec have confirmed that Buying WOW on or before Wed 23rd and Selling WOW today will still get your EDV allocation. Which is what should happen.

With this new updated information, the SPA3 Investor ASX Public Portfolio, which is executed on the SAXO platform, will exit WOW as soon as the EDV allocation is able to be sold. Right now the SAXO platform does not recognise the 512 shares that are held when trying to execute a Sell Order.

Regards,
Gary

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My broker was willing to sell the WOW shares and EDV shares on the phone at internet brokerage. At the time, the price of the respective shares were $36.77 and $6.39. This amounts to a total price of $43.16 - almost $3 above our entry price from memory. Therefore, if this split did not occur there would be no sell signal.

I am wondering if I should sell the lot or hold onto it given that some broker slapped at $7 price this morning on EDV. In other words nothing seems to have changed from a fundamental aspect.

Happy to hear feedback.

12

Totally confused. Sold my 3100 holding at opening this morning as per sell signal. Everything I read seems to have a different interpretation of the dates. A poorly handles spin off.

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Most will now be aware that a Corporate Action has been applied to the WOW share price in Beyond Charts. The Corporate Action is applied via what is called a Dilution Factor. This can either be a ‘stock split’ (all historical prices are factored lower) or a ‘stock consolidation’ (all historical prices are factored higher). You can see all these splits and consolidations for every stock under Corporate Actions in Beyond Charts.

The result of the Corporate Action being applied to WOW is that the Sell Signal that showed for WOW is no longer present. Meaning that, according to SPA3 Investor, WOW remains an open trade.

Firstly, how could this happen?

I had a long discussion with our data provider about the implications of applying this Dilution Factor to the Thursday 24th June ‘final’ data on the morning of Friday 25th June, i.e. changing the data after the fact, rather than applying it to the following trading days ‘final’ data, i.e. Friday evening at 7.30pm.

The bottom line is that the timing of publishing Dilution Factors for all Corporate Actions from the relevant stock exchange authorities over the years has been, and continues to be, inconsistent. Hence the policy adopted by our data provider is to apply them to their data download as soon as they are known.

In nearly all cases, SWS and our members do not notice this ongoing data cleansing and management process happening in the background. (In the ‘old days’ most data providers didn’t adjust for splits and consolidations, investors had to do it themselves! Some still don’t do this well enough!)
The WOW scenario obviously has been noticed.

Importantly, applying a Dilution Factor is the right thing to do for correctly charting WOW going forward, because WOW became roughly 11% less of the business it was before the spin-off. So it had to be done.

The next question was WHEN to apply the Dilution Factor. Ideally as soon as WOW started trading ex-EDV, i.e. on Thursday 24th June. In this scenario that didn’t happen as the Dilution Factor hadn’t been provided, probably not yet calculated either by the ASX because EDV hadn’t started trading.

Alternatively IMHO (and our data provider’s), WOW should have had a Trading Halt and/or EDV traded on a Deferred Settlement (as EDVDA) as has happened over the years with so many other similar situations.

If the Dilution Factor had been applied on Thursday 24th June at 7.30 pm then there would NOT have been a Sell signal.

But that did not happen so we now have a situation where some have sold WOW and others haven’t.

What action to take…

It is now clear that if you sold WOW today you will get an allocation of EDV. Some appear to already have an EDV Sell Price from their broker, others may have to wait to see what that Sell Price is to enter into your Portfolio Manager.

Following your Investment Plan you should have taken a new position in a different stock today, so your capital should be the market, just in different stock. And potentially in a smaller position size (if you didn’t have any other available cash in the portfolio) as the EDV portion won’t settle until next week.

For those that did not Sell, because they are waiting to be able to sell their allocation of EDV on their broker platform (like SAXO), you now have updated data which is deemed to be correct.

So Sell or Hold?

SWS cannot definitively provide advice as to which you do, except to say follow your Investment Plan.

In following the Investment Plan for the ASX Public Portfolio, having not sold for the reasons stated on this Forum earlier today, we have to continue to HOLD WOW, because the new data shows NO Sell signal.

Having sold and re-entered a different stock, or holding WOW based on updated data, are not ‘trading errors’ according your Investment Plan.

We can only act on the data we have at the time. And for the sake of the timing of the recording of the price data for this change in WOW’s business, both data sets were correct at their respective times. This happens in the real world.

Learning from this scenario

We must continue to maintain Investment Plans that can handle just about every type of market scenario so we can easily and efficiently determine what objective action we take in the heat of the moment when it arrives.

SWS will update the SPA3 Investor ASX Public Portfolio Investment Plan to include clauses for Takeovers and for Corporate Actions.

I trust that this clarifies this unusual scenario.

Best Regards
Gary

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Thanks for your detailed explanation Gary…obviously this situation doesn’t happen often…however, given the way this Demerger split was handled it just added another level of confusion! I hope i took the right action thinking I can sell EDV shares (when allocated by Commsec on or by 1st July)…If i was clear I perhaps would have held on to WOW and just sold EDV later on 1st July…as a matter of interest for others I entered a position in ORG under the AP after selling WOW and in advance of selling EDV when I am allocated the shares… Thanks again

15

It appears to have been an interesting day given the number of emails in my Inbox.
I rely on the SWS SPA3 Investor Alerts app notifications provided to clients at the end of the day and there’s been no SELL signal for WOW this week.

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There was a sell on the app last night to be actioned today…I notice it has now been removed …like others I sold this morning but thought I would still be entitled to the EDV shares….as this has been on the cards for a while, although unusual, I am disappointed it was not thought through earlier especially as WOW was not sold in the public portfolio today despite the sell on the app …I didn’t see the posts on the forum until this evening.

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Graham and Therese,

My email above explains in quite some detail why and how this happened.

In a perfect world with all the required information needed to calculate the Dilution Factor, it would have been applied with Thursday night’s ‘final’ data. If this could possibly have been done it would have and there would NOT have been a Sell Signal with Thursday night’s data.

However, all the variables required to make this calculation were NOT available until EDV started trading on Friday morning. The Dilution Factor was applied by our data provider ASAP after this. After a long discussion with them this afternoon I am satisfied that the process they followed was the correct one, with usual circumstances.

Unfortunately, the application of the Dilution Factor to WOW’s historical data ‘undid’ the sell signal.

SWS does not own the ASX price data. It is ‘owned’ by the ASX who are the original source of the price data. And they can only reflect the price data of the actions taken by the listed companies on the ASX.

To be clear and precise, SWS did not ‘remove’ the Sell Signal. The adjustment of the historical data removed the Sell Signal, and the App and Beyond Charts merely calculate the Buy, Hold, Sell based on the data at any given time.

As stated in my earlier email, neither Selling or Holding in this instance is a “trading error” according to the rules of the SPA3 Investor methodology. The unambiguous decision made by anyone is based on the data that was available at the time they saw it.

It is very unusual that the ‘final’ price data changes. I repeat, a decision can only be made based on the data that one sees when one sees it.

Also, not everybody sells at market on the open or soon after. Many execute later during the trading day.

I have often, when travelling or for other reasons, only looked at what actions to take on a given day well after the market has opened. And pre-App days the chart was consulted.

If that had been the case with todays unusual scenario I would NOT have seen the exit signal on the chart and would NOT have sold. I’m sure there were members in that situation today.

“Thinking it through earlier” would not have made any difference because I could not foresee what the Dilution Factor would be.

I trust that this further clarifies the situation.

Best regards,
Gary

18

Great stuff Gary - just one of those weird anomalies that the market throws up from time to time. System still performing beautifully with new equity highs for me this week.

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I have sold my EDV but not my WOW
I am struggling to see how should this be entered into Portfolio Manager; presumably it is a sale of part of the original WOW position but, of course, the number of WOW units recorded in Portfolio Manager remains the same
some guidance would be appreciated

20

The easiest way would be to record a new trade of EDV at zero dollars (& brokerage) with a buy signal then record a new trade as a sell with sell or other signal at the sell price. Put in a comment as why this transpired. Your WOW will just continue on until a sell signal is generated.