Heritage Railway and Locomotive share holdings

Many heritage lines have issued shares to raise money for purchase and infrastructure additions/enhancements. Similarly many locomotive restorations and new builds have share issues. We have been told, or have understood, these to be essentially donations with no "real value". This is also, I believe, the case when they become part of the estate on the owners death.
However is there not - or should there be, a market place for such shares now that the heritage movement is relatively mature?

 

Why would there be a market for shares that give no return - who'd want to buy them?

 

Perhaps someone who would like to have control of any voting rights associated with the shares. . .

 

If they have no value except for conferring voting rights they should be either extinguished on the death of the owner or sold on for a donation to the item concerned. All these old "lost" shares do nothing but dilute the control of the shareholders over the organisation.

 

There is also the asset value.... We know a new build pacific will cost approx £4m, what is the value of a restored Bulleid Pacific with 10 years on the boiler ticket?

 

....So "sold on" would imply they do have a value to some one or to some charity? Should, or could that charity offer a percentage of the nominal share cost?

 

They could, so when the shares were handed to new donors in return for new donations the organisation issuing the shares gained some further income. Personally I'd suggest they should be extinguished. They were a gift to a donor in return for his gift and should be treated as nothing more. In that way the organisation could issue new shares for the full value of a donation.

 

The catch there is that the current rights in the shares are those that the shareholder signed up to at the time they bought the shares, and that to change the rights, the company will have to go through whatever legal processes are required to change shareholders' statuses.

 

Accepted - but this thread is about suggestions for the future, so such changes could be brought in. Of course, as has been seen elsewhere dilution of the voting rights of the shareholders can be seen as a benefit to the more autocratic trustees...

 

Many lines have done that in the past; I wonder though how many will do it in the future. Technically, if you are a plc and you offer shares, they are treated as an investment by those prospective buyers; that comes with a whole world of regulatory pain from the Financial Conduct Authorities. So a share issue is an expensive way to raise capital, and that is before you get to the ongoing costs of maintaining details of a shareholder long after any money they invested is used up. Look at the WSR shareholder list; it has hundreds of people on it whose investment was £5. How many times more than that has been spent over the years dutifully complying with maintaining them on the register? The madness in some set ups is that a person who donated £5 forty years ago is somehow considered to have greater rights than someone who has paid an annual membership fee perhaps five times higher this year.

As for selling a shareholding on the open market: how does that benefit the host railway? Once a share is sold, any ability of the host railway to raise further money from that share is lost, but they potentially still have the admin involved in changing a name on a share register if it is sold privately.

My own view is that private investment in a railway company or locomotive is a poor way to structure things. If what you want to do is make a donation, then make one: the defining point of a donation being that it is made with no thought of return benefit. If what you want to do is have some measure of control, then that is best achieved by joining a society, for which you get voting rights all the time you remain a member. Structuring as a company with shares when what you are really doing is soliciting donations is a very inefficient way to go about raising capital in this sector.

Tom

 

Am I right in thinking that the available company structures have changed since many preservation organisations were set up, and therefore that options exist that weren't available 50-odd years ago?

 

We go over this ground with suggestions of ‘donation appeals good, share issues bad’.

SVR (Holdings) plc 2016 share offer raised £2,548,595 gross, £2,427,348 net. The initial cost was 4.75%. There was an additional £83,000 in donations. The previous share offer also cleared £2m gross. (Even without share offers, ad hoc purchases have averaged approximately £145,000 per year.)

For comparison, the SVR’s two most recent grand appeals are Falling Sands Viaduct £397,000 and its Fight Back Fund (FBF) £900,000 (including some share sales).

Its share offers – ‘the chance to own part of the Railway’ and travel benefits - raise much more than appeals. Taking the most recent the SVR’s share issue outperforms its FBF donation appeal by around 2.5:1. The annual cost of keeping in touch (some advantage there) doesn't bridge that 2.5:1 gap.

IMO it’s what works for each line, without a ‘good’ or ‘bad’.

Yes: Community Benefit Societies, Charitable Incorporated Organisations et al.

I can think of some groups whose shares are non-transferrable, others where there's a vote per shareholding. Anything that is a plc has conditions attached. It's difficult enough to get a stockbroker to trade the shares.

(For the SVR plc it is an unlisted company and its shares are not currently quoted on any trading platform, nor are there any matched bargain facility arrangements. There is currently no secondary market in the shares and shareholders may only sell their shares by way of private bargain if they can themselves find a buyer. I’ve bought shares for my daughters and they’ll inherit our minor shareholding too.)

Patrick

 

Membership of a society can be subject to censure, particularly if a person is intending to vote against the incumbents. Ownership of shares is much more difficult to remove.

 

Maybe we'll have to agree to disagree. Though it would be interesting to know whether the amount of money raised would have been significantly different had the SVR chosen to base its appeals primarily through a charitable route rather than a shareholding one.

On travel perks: I get those on the Bluebell as a life member (free first class travel) and I think over the years I have done fairly well if you measured it strictly in cash terms. Though increasingly, and specifically this year, I choose to forego the privilege and pay a fare.

I'm lucky to be well enough off (not rich, but not poor) to find I get more enjoyment from donating money to causes I believe in and seeing the impact, rather than buying things for myself. The railway is one such cause, though not the only one. No doubt economists might find an interesting study in why many people choose to volunteer their labour and undergo expense, when on the face of it they might be wealthier if they used such time to work for their own material gain.

Tom

 

Tom
It would be good to get not only an economists view, but also a sociologist and a medical/psychological view on our hobbies/obsessions!

 

Or not as the case may be!

 

The £397k Falling Sands one was through the CT. The Fight Back Fund mostly wasn't. I believe (note: this is not official) the railway needed the flexibility to pay bills such as salaries and a charity's objects may not allow them to fund the plc to pay them. I feel pretty certain though that a difference between £0.9m to £2.4m wouldn't be bridged by a charity appeal and gift aid in any case.

Patrick

 

Here's a question, what are the largest non-share appeals across heritage railways (excluding grants and bequests)? My gut feeling is most top out around a quarter to half a million and only one of the Covid ones has gone past that point. The Bluebell extension, GWSR, Great Central and NYMR bridges though come to mind as possibles.

Other than the SVR, have there been there any share issues of the same magnitude?

(Sorry if this goes a bit O/T)

Patrick