I had a few shares of a Blue Chip company. I know they once had a push to encourage people to own at least 100 shares, as I recall. Yet, I survived with my modest investment. However, recently, I learned they apparently cashed out my stocks! How is that legal? Can they tell me they don’t need my business anymore?
Also, if I made a profit, do I have to pay a capital gains tax? I didn’t want to be cashed out, mind you. Must I pay the penalty? If it matters, the money is being held as unclaimed property (for now).
My guess is that the stockholders of this corp all sold their stock to a new buyer. There are ways to structure this type of transaction where small stockholders just get cash whether they want it or not.
I’d google the name of the company + reorganization and that should tell you what happened with that particular company.
I don’t often see a mandatory odd lot exchange. An odd lot is a number of shares which is under 100. In the past, it was expensive for a company to keep someone holding a small number of shares on their books. The postage costs for mailing out proxy and other corporate materials adds up over the years. Of course, now most are done electronically.
If your shares do undergo some sort of mandatory reorganization, then you are responsible for paying tax. A 1099 form should have been issued by the firm holding your shares. Of course, that would have been mailed to the address on file. Since the shares/proceeds are now being held in unclaimed property, the account must have been escheated to your state at some time.
Were they preferred shares or common shares? One of the potential pitfalls of preferred shares is the company frequently has the option of forcing a purchase from you at a time of their choosing. I got burned on this once, which is how I learned (the hard way) this little fact.
If you were willing to share the name of the company, somebody here could probably comment on exactly what happened. Most likely, they were acquired (or went private, as noted). If it really was a “blue chip” that would have been a newsworthy item.
Of course, you can dig this out yourself, and if you had been following news on the company, you would have known it was coming. You were probably mailed a proxy to vote on it at some point. Of course, for most deals of that sort, your vote is unlikely to do anything except register your displeasure. Most of the time, when a company’s board has decided to do something like that, they have their ducks in a row and know they have enough votes before it goes to the shareholders.
It can really make a bad day. One company I owned, Canadian Fording, was bought out - handsomely I will add. I much preferred the company as it was however for paying out a significant dividend. I was stuck with a very large tax bill (even if only 15% long term capital gain) on my 2008 taxes even as every thing else I owned was tanking.
Note that Fording was a royalty trust, not a regular company, which is why it paid the high yield (and may have paid a portion of the distribution as return of capital). The tax status of canroys is due to be changed to that of normal corporations in 2011. The continuance of high yields is very much in doubt - trust share prices dropped like a rock in 2006 when the Canadian government announced the changes - the so-called “Halloween Massacre”.
I didn’t panic sell mine, but as they recovered I did find points at which to exit most of them rather than find out how they were going to fare - I still have some PWE. There’s other income vehicles out there.
I recently exited PWE. It was a great ride. I had predecessors as well NCN/NCE. Nice dividends and some capital gains The total was not quite a “ten-bagger” but definitely up there. I am an investing genius (wait - what about that Lucent, oh yeah, and that real estate investment trust, and …)
Yeah, I had some as NCE Petrofund, too. If we’re all non-Canadian, we’re illustrating one of the things that had the Canadian government’s nose out of joint about them - all the foreign (mostly US) ownership of them, with all those distributions flowing south. They take a 15% tax out of them, so my sympathy was minimal (it’s also not much skin off your behind, as you usually get it all back at tax time as a foreign tax credit anyway).