Broken Promises

What if.....you had purchased shares in a heritage railway in their time of need, say £50 worth, for which a benefit such as two free return tickets per year and a small discount against purchases from their shop was offered. If there was no limitation on time in the share offer, would you feel agrieved if, some years later, you were informed that this benefit was to be withdrawn?

 

You sound as if this has happened to you presonally?

Can you tell a little more please?

Regards
Chris:

 

I think that this is the same railway as the one that I've been a shareholder of since 1984, but if I'm wrong please forgive me.

I know that some people have been told that they will lose their perks unless they increase their shareholding. I've not had such a letter because I bought more shares a couple of years later. To be fair, two free return tickets every year on a long line is a pretty good return on a 50 quid investment, as most shares give dividends of 10% if you're lucky = a fiver, which these days won't get you past a couple stations on a preserved line. A true supporter would not object to being asked to buy some more shares. You didn't buy the shares just to get the free trips, surely?

Legally, you may be right, but ...

 

I don't know the details of this, but did the original offer include an "opt-out" in the terms and conditions which allowed the railway to change the offer at a later date?

Richard

 

It is my case too! I'm shareholder of the SVR since 1988 ( for 50 pounds: benefit a 3 nd ticket p year)) and some years after my subscription i was asked to subscribe more for one privilege ticket(3 nd class) /year
Of course I have refused : I felt betrayed a bit!
regards
Noel

 

As inflation increases and £1 reduces in spending power, it is only natural that after a time to maintain one's 'dividend' at a set level of value one must increase one's stake in a company.

If you bought a £50 stake in a 'normal' shareholding company with the promise of a 5% dividend, you would receive £2.50 per annum. After twenty years if the dividend was maintained and the value of the share did not change you would still receive £2.50 per annum, even though that £2.50 would be worth less.

The company with which you have invested has in effect given you a dividend of two free tickets per annum since your original £50 investment, a dividend that has increased in value in line with inflation even though your original investment has not. Therefore, I do not think it unreasonable that they ask you to enlarge your investment to retain your dividend.

 

I have shares in the Bluebell. Some time back the perks were withdrawn. Did I fell "betrayed?" Not one bit as I bought the shares to help the railway and the perks were a nice bonus all the while they lasted. To paraphrase President Kennedy "ask not what your railway can do for you but what you can do for your railway."

 

Or "Ask not what you can do for your Railway but what is your Railway doing to you"..

 

If people are so keen on perks, why don't they become a member of said railway for the benefits that brings? There comes a time where the value of the perks exceeds the value of the original share holding and at that point if the share holder declines to purchase more shares, they are becoming a liability rather than an asset. Can't say I blame the railway for withdrawing benefits under those circumstances.

 

Absolutely correct, Ian.

I've been a WSR shareholder for more than 20 years and never taken the "perk". The WSR has just withdrawn "perks" for those with minimum shares (like me). I don't blame them a bit. In fact, despite holding several passes for free WSR travel, I always pay the fare if travelling for leisure.

Steve

 

I increased my shareholding, and will do again at the next appeal

The SVR did apologise for the way it was done (in arrears), and the bad feeling it caused, and slightly amended down the shareholding levels (e.g. £101 to £100 to avoid the £1 trap). I don't think many were aggrieved on a matter on principle that they periodically reviewed it though.

Patrick

 

GWSR also did this a couple of years ago, and I duly increased my holding to the new minimum of £100. I think it's entirely reasonable once the value of the perk becomes out of proportion to the shareholding. And for interest, public companies can change the terms on which they offer perks to shareholders as well, and the adage there is never to buy a company's shares for the perks.

 

The admin of small shareholdings is also expensive. At a minimum, you have to receive annual accounts and there has to be an AGM - if you reckon on the printing and postage costs, costs of maintaining a register of shareholders etc, it probably costs a couple of pounds per year per shareholder just to administer. When the Bluebell did its most recent round of share issues a couple of years back, there was lots of grousing about the minimum investment of £250; however, had it been set at say £50, you'd eat through that money just sending out accounts in a very short space of time, before you even think about benefits.

As for benefits themselves - in effect what you are receiving is a dividend, just like on any other, more commercial, shareholding. Such dividends can go up and down, and if times are hard, may even be totally withdrawn (tell me about it - I own shares in a bank that has been ordered by the government not to pay dividends!) So I think it is perfectly acceptable that a company reviews their dividend from time to time. Personally, I have Bluebell shares. At my level of shareholding I get two free tickets per year, but that dividend (or benefit - call it what you will) is reviewed annually; and that was made clear in teh initial share prospectus.

Of course, if when the said shares were initially offered many years ago there was a legally binding promise to maintain a certain level of dividend (for example, free tickets) in perpetuity, then maybe I'd feel aggrieved if the company tried to go back on that promise. But I'd also be surprised if such an offer really were made; certainly if so, I'd consider the company was poorly advised in making such an offer without thought of the long term financial consequences. And ultimately there is also an element of caveat emptor: if an offer looks too good to be true (free tickets for life!) it probably is.

Tom

 

I'm not disagreeing with your comments Jamie, but it's worth remembering that a £2.50 dividend costs the company £2.50, whilst 2 Third Class tickets cost the railway nothing more than the postage.

 

Unless one assumes that the shareholder would visit the railway if he were not a shareholder and pay for his two tickets, in which case the loss to the railway is £20+

 

That's quite an assumption - the other assumption is that said shareholder only goes there because he has the free tickets and spends some cash in shops, cafes and bars whilst he's there - I certainly do!

 

The prospectus for the original share issue, assuming it was a public offer, would have included the warning that the value of investments may go up or down depending on how the company is doing.

 

Although I'm a lawyer, I feel sad at the legalistic attitude of some people. Surely, we buy shares to help a good cause and to feel that we have a stake in the not for profit (except insofar as profits are needed for reinvestment to keep the show on the road!) enterprise. Free trips are a goodwill gesture, and if circumstances arise that the railway can't afford these any more, let's not whinge. Just be grateful for the free rides that you've had.