Shareholder perks range from cheaper restaurant bills to a free day at the races, but are all the deals and discounts worth it?
Shareholder perks, where investors in a business benefited from an array of discounts and freebies as a privilege that came with owning a slice of the business, are more rare today than in the past.
Turn the clock back 20 years, when most shares were issued in the form of paper certificates, and private investors were a far greater force, and such perks were much more common. They included seriously generous discounts on groceries, travel tickets, holidays and much more.
The rise of big institutional investors put paid to many of these arrangements but there are still some welcome perks, provided you know where to find them and, more importantly, how to claim them.
Earlier this week Merlin Entertainments, the theme park operator, announced plans to float on the stock market in coming weeks. The company, the world’s second-largest visitor attraction operator (after Walt Disney) runs 99 attractions in 22 countries. Well-known British sites include Legoland, Alton Towers, Chessington, Thorpe Park and Madame Tussaud’s.
The announcement caused some excitement. Small investors who buy in are offered a double-whammy: the chance to participate in the business’s hoped-for success as with any shareholding and, the icing on the cake, discounted tickets to its attractions. Merlin’s announcement, with this direct appeal to private investors, put shareholder perks back in the limelight.
What perks is Merlin offering?
Investors who buy £1,000 worth of shares will be given a 30pc discount on either two adult Merlin Annual Passes, which cost £119 each, or one Family Merlin Annual Pass, priced from £356 for a family of four.
A family buying and using the Family Pass save £107, which represents a theoretical “loyalty yield” of 10.7pc for £1,000 worth of shares.
This is arguably an attractive option for investors who like the look of Merlin and who have young children, but there are plenty of money-off voucher deals also available which can net you a similar discount without your having to put capital at risk.
Do I always have to invest that much?
If you do not want to gamble so much capital there are “cheaper” perks available, where your stake does not have to be as large. Some companies, such as BT (LSE: BT-A.L - news) , Marks & Spencer (Other OTC: MAKSF - news) and Restaurant Group (LSE: RTN.L - news) , offer perks where shareholders own as little as just one share.
But don’t expect too much. Buying just one share in BT for (currently £3.65) can get you slightly cheaper broadband, along with a wine voucher worth £30, which you have to spend with one firm.
A £4.88 share in Marks & Spencer will earn you a booklet of vouchers giving a one-off discount of 10pc across a range of shopping, while a £5.66 share in Restaurant Group will get you discounts of 25pc which can apply to 12 meals during the course of a year at a number of food chains, including Chiquito and Frankie & Benny’s.
As ever, it’s a matter of risk and return
The better perks do tend to require more commitment, and therefore the shouldering of greater risk, from investors. Some give shareholders unlimited discounts, such as Bloomsbury, the publisher. Anyone owning 200 shares (equating to £34) can get 35pc off all books published under the Bloomsbury imprint. Provided you like the authors on Bloomsbury’s catalogue, this is perhaps the best perk available. For just £100 spent on books you will have got your money back.
Other enticing perks include British Airways, now quoted as International Consolidated Airlines Group, gives shareholders 10pc discounts on fares from or within the UK (albeit with some restrictions). Another is TUI Travel (LSE: TT.L - news) , which owns the First Choice brand and is offering up to £80 off holiday bookings for 500 shares (worth £189).
Young & Co’s Brewery gives its shareholders around 50pc off its hotels. One share in the firm costs £9.98, while the half-price hotel saving typically stands at £55.
Other perks offer free event tickets. Newbury Racecourse offers its shareholders two day member badges to a horse racing event of their choice.
Some others offer savings on food and drink. For instance the English wine maker Chapel Down Group gives its shareholders with holdings of £400 a 33pc discount on its products, which include prize-winning sparkling wines.
It is not only shares that come with perks attached. “Mini bonds”, fixed-interest investments targeted at individuals, sometimes include perks. For instance, Hotel Chocolat gives out a box of chocolates every two months to bondholders, while John Lewis offered vouchers to those who bought its bonds in 2011 as part of the income. Unlike shares, these bonds are not traded on a stock market.
The perks that are not worth it
A number of perks on offer are simply not worth it. In order to receive a one-off 25pc discount voucher in clothes retailer Next, an investor needs to buy 500 shares. With shares priced at £52 it becomes rather expensive, necessitating a £26,000 stake.
The price of the perk is also not attractive for shareholders of Telecom Plus. In order to bag a 10pc discount on your broadband or phone line you will need to buy £21,450 worth of shares.
Guy Ellison, head of equity research at Investec Wealth & Investment, said savers should view perks with a pinch of salt. “Some perks offered by companies have failed to move with the times and are no longer the added bonus for shareholders they once were. Next is a great example. The offer was attractive when the shares were a lot lower but not for £26,000,” he said.
Sheridan Admans, of the broker the Share Centre, said investors should beware buying shares in a company just to take advantage of the perks on offer. “While many companies offer these shareholder perks, investors should never make an investment decision solely on the basis of the perks available,” he said. “Investors must remember that these benefits are subject to change and have no bearing on the performance of the stock.”
How to make sure your broker gives you the perks
To be eligible for the perks it’s often best to hold paper share certificates in your own name. But this form of share ownership is increasingly unusual nowadays when most people hold nominee accounts through major brokers such as Hargreaves Lansdown (LSE: HL.L - news) or Barclays Stockbrokers.
Where you have a nominee account, brokers do allow you to claim any discount or perk you are entitled to, but you will have to ask your broker to confirm your holding. There may be a fee for this service.
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