Of all the potential disruptions a no-deal Brexit might be expected to cause, Brits not being able to buy shares in EU companies is not one that has received any consideration. Until now. Budget airline Ryanair, Europe’s most popular short-haul carrier by passenger numbers, have announced that a no-deal Brexit would result in UK citizens no longer being welcome as investors in the company’s shares.
That might sound extreme and illogical, given that there is no such barrier to Brits investing online in the shares of other international companies around the world. But Ryanair’s situation is somewhat unique. EU law pertaining to Ryanair’s operating license stipulates that airline’s majority ownership must remain in the hands of EU citizens or registered companies.
However, with Ryanair currently holding a dual public listing on both the London and Dublin Stock Exchanges, combined with the brand’s high profile in the UK, a significant percentage of its ownership is in the hands of UK-based investors and companies. Currently around 55% of Ryanair’s equity is in the hands of EU-based investors.
However, approximately a third of that total, around 18.3%, is made up of British investors. Losing their contribution to the company’s quota of EU-owned equity would see the airline drop significantly below the majority stipulation.
If the UK exits its EU membership with no political or trade agreements in place, that could potentially see Brussels judge that Ryanair’s ownership breaches the terms of its licenses to operate in the EU.
An announcement yesterday detailed the Friday decision of its board to activate a Brexit ‘contingency plan’. That not only means that British investors will not be allowed to buy Ryanair shares for the foreseeable but that existing investors will see their equity reclassified as ‘restricted shares’. Restricted shares do not carry any voting rights.
The restrictions announced yesterday will hold until such time as:
“the board determines that the ownership and control of the company is no longer such that there is any risk to the airline licences held by the company’s subsidiaries”.
While institutional investors will likely have the option of transferring ownership of shares to EU-registered subsidiaries, those privately investing online into ISAs and SIPPs will not have that luxury. These investors will have to either accept that their Ryanair shares no longer carry voting rights, hold onto them in the hope that the situation works itself out and they will be reinstated to their previous class, or sell up.
The latter option may well mean taking a loss after Ryanair’s share price plunged by almost half in the year and a half up to January, with investor confidence hit by disputes with pilots and the issuance of two separate profit warnings. They have recovered by around 20% over the course of February and March this year but some UK investors may now feel they no longer have the luxury of holding on for a fuller recovery.
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