How to handle the NAB demerger and CYB IPO

Recently National Australia Bank (NAB) announced that they’re proceeding with the demerger and IPO of CYBG PLC (CYB). According to NAB chairman Ken Henry, the NAB demerger and decision to spinoff Clydesdale Bank will allow NAB to focus on its core markets of Australia and New Zealand.

The mechanics of this demerger are that existing shareholders in NAB will receive new shares in the new standalone Clydesdale Bank. The total value of the two entities will not change, however, as the value of the new shares in Clydesdale will be offset by a corresponding reduction in the value of your NAB shares.

What the NAB demerger means for investors

The NAB demerger will have implications for all investors with NAB in their portfolios and may affect your tax situation depending on where you live. The NAB demerger will affect you differently if you’re an AU/NZ investor, an overseas investor, or considered a Small Shareholder. Finally, if you’re ineligible to participate in this demerger, NAB will send you the proceeds of any CYB shares that you would have been entitled to on your behalf.

Sharesight makes it easy for investors to handle corporate actions (even complicated demergers) and track the capital gains tax implications. The benefit of using Sharesight to track the NAB demerger also ensures that you maintain an accurate record of your portfolio performance.

How to handle the NAB demerger

1. Sign up for a FREE Sharesight account and add your NAB holding.
2. You'll want to enter a return of capital to your NAB holding. To do so, go into your NAB holding and click Enter a New Trade or Adjustment.
3. On the pop-up, select Return of Capital from the transaction type dropdown.
4. If you're an Australian or New Zealand investor, you'll want to use 8 February 2016 as the date of trade. If you're overseas, you'll want to use 4 February 2016 (the date the Clydesdale shares started trading in each respective market).
5. Based on the class ruling detailed here, record a return of capital based on $4.01 per share of CYB (the volume weighted average price, or VWAP).
6. Now, you'll want to create a new portfolio holding for CYB. To do so, click Add Holding from the Overview or Holdings tab.
7. Find CYB in the ASX and use an Opening Balance transaction. Note that if you're outside of AU/NZ, you'll want to use the LSE listed security.
8. Enter the quantity of CYB shares that you acquired using the same $4.01 price mentioned above (the cost base should equal the return of capital from step 4 above).
9. Note: If you sell your CYB shares within the first year, Sharesight will not apply the 12 month CGT discount.  You should be entitled to this if the original purchase date of your NAB shares was at least 12 months ago.  You will need to manually adjust this in the CGT report to apply the CGT discount.  If you hold CYB shares for more than 12 months after the demerger date then no further adjustments will be necessary.

Adjusting your cost base in your NAB holding:

Adding CYB using an opening balance:

Please note that we always advise you to consult your financial advisor or accountant regarding corporate actions, especially for tax purposes as we are not authorised to provide financial advice. The information below, including the dates is subject to change. We encourage you to review the official NAB offer document for full details.

For most investors these corporate actions can be time consuming and confusing. Sharesight provides you with the tools and technology to keep your portfolio up to date. And remember to check our customer forum for steps to handle these corporate actions and to interact with other investors.

GET HELP

• Community Forum -- NAB Demerger & CYB IPO
• Help -- Corporate Actions

FURTHER READING

• Blog -- How your broker’s performance numbers mislead you
• Blog -- Corporate actions and your investment performance
• Blog -- 7 reasons why Sharesight is better than a spreadsheet