What do you think of this strategy?(Numbers/ dates etc used below are for discussion purpose only and hence approximations used. There are assumptions based on SP, duration of holdings prior to sale, buyout timeline and buyout price.)Let’s say I have 100K RAC shares bought at $2 bought in Nov 2020.Scenario1: I hold my 100K shares till buyout say June 2022 for a buyout price of $30.Then my profit is: $30-$2=$28 * 100K= $2.8MnTaxable profit (at highest tax rate, approx 50%) after holding for 12 months= $2.8Mn /2 = $1.4Mn at 50%= 700kSo my profit after tax= $2.8Mn-0.7Mn=$2.1MnScenario2: Sell all my shares and buy them back with aim to have more units.I sell my 100K shares on 31/3 at SP of $3.5. Total value = $350KOn 8/4 when the SP is $3, I buy back the shares: $350K/ $3= 116,667 shares(So now I have additional 16,667 shares compared to scenario 1 where I just sit on my holdings)At buyout, in June 2022 for a buyout price of $30:My profit is: $30-$3.5=$26.5 * 116,667 shares= $3.1MnTaxable profit (at highest tax rate, approx 50%) after holding for 12 months= $3.1Mn /2 = $1.55 Mn at 50%= 775kSo my profit after tax= $3.1Mn - 0.775Mn= $2.32Mn.However, in scenario 2 I would also pay tax on the sale at $3 (sold on 8/4) and my initial purchase price is $2 bought around Nov 2020.So, for 100k shares the profit is $3-$2=$1*100k shares= 100kShares held less than 1 year, so full amount is taxed at 50% (approx). So tax= $50kNet profit = $2.32Mn-0.05Mn= $2.27MnIn scenario 2 I gained 170K more than in scenario 1.So per above example is it better to be in scenario 2 where one opportunistically sells and buys back at lower price to gain more shares despite having to pay CGT in short term? Let me know your thoughts.
General Comments / Chat, page-2514
-
- There are more pages in this discussion • 8,862 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add RAC (ASX) to my watchlist
(20min delay)
|
|||||
Last
$1.68 |
Change
-0.030(1.75%) |
Mkt cap ! $286.2M |
Open | High | Low | Value | Volume |
$1.73 | $1.73 | $1.68 | $119.9K | 70.42K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 3012 | $1.66 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$1.70 | 6382 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 3012 | 1.660 |
1 | 1205 | 1.650 |
1 | 3067 | 1.630 |
1 | 615 | 1.620 |
2 | 18200 | 1.615 |
Price($) | Vol. | No. |
---|---|---|
1.700 | 6382 | 1 |
1.735 | 609 | 1 |
1.750 | 10096 | 2 |
1.780 | 4483 | 1 |
1.790 | 1000 | 1 |
Last trade - 15.07pm 03/09/2024 (20 minute delay) ? |
Featured News
RAC (ASX) Chart |