Invest Skeptically

Barry Critchley at the National Post reported yesterday, in Who is Sun Life’s seller?, of Sun Life Financial’s strange plan to repurchase shares from “an arm’s-length third-party seller” between December 12, 2007 and December 31,
2007. Critchley quotes one market participant as saying, “here is a clear preference being afforded to the vendor, which would otherwise have to take the risk of disposing of the shares over time and possibly depressing the market price as it does.”

This type of behaviour is bound to attract criticism from other shareholders and market watchers. It can’t be anything but bad PR. So what would motivate an issuer to perform such a transaction? Are they getting good fees to do this? Is this is a favour to a long-standing and profitable client? It’ll be interesting to see if any further disclosure from the company is offered on this topic.

Here’s the Sun Life press release:

Sun Life Financial to purchase up to 2.55 million Common Shares for cancellation in Private Purchases

TORONTO, Dec. 7 /CNW/ - Sun Life Financial Inc. (TSX/NYSE: SLF) announced today that it intends to purchase for cancellation up to 2.55 million (0.46 per cent) of its common shares currently outstanding pursuant to private agreements between Sun Life Financial Inc. and an arm’s-length third-party seller (the “Private Purchases”) between December 12, 2007 and December 31, 2007. The shares purchased for cancellation pursuant to the Private Purchases will be included in calculating the maximum number of common shares that the Company may purchase through its normal course issuer bid share repurchase program that was announced on January 11, 2007.

The Private Purchases will be made pursuant to an issuer bid exemption order issued by the Ontario Securities Commission and a Notice of Intention to make an exempt issuer bid filed with the Autorité des marchés financiers in the Province of Quebec. The price that the Company will pay for the shares purchased under the Private Purchases will be negotiated by the Company and the seller, provided that in no circumstances will the price paid for the shares be greater than the closing market price of those shares on the Toronto Stock Exchange on the dates of the purchases. The Company believes that purchasing its shares under the Private Purchases at a price below the market price of its shares is an appropriate use of corporate funds.

None of the directors or senior officers of the Company, nor any associates or affiliates thereof or of the Company, nor any person holding 10% or more of any class of equity securities of the Company, nor any associates thereof are eligible to sell shares pursuant to the Private Purchases since the Company intends to purchase shares only from the arms-length third-party seller.

I received this helpful reminder from my online brokerage: “The last day to sell Canadian Stock in order to settle in the 2007 calendar year is Monday, December 24. The last day to sell U.S. stock in order to settle in the 2007 calendar year is Wednesday, December 26. ”

The same reminder message also told me to watch out for the superficial loss rules in the Canadian Income Tax Act. After some quick googling, here are two links on the subject by the Canadian Tax Foundation and by Wood Gundy. My understanding (although I’m no tax lawyer) is that the laws are in place to prevent investors from crystallizing a tax loss while maintaining an economic interest in the asset.

Some mixed reporting on the China product safety file in yesterday’s New York Times.

• China Resisting Pressure on Product Safety
  “The ’strategic economic dialogue’ begun by Mr. Paulson was meant to obtain greater access to the Chinese market for American goods, services and investments, as well as steps by China to allow its currency to appreciate in value against the dollar, making American goods cheaper there and Chinese exports more expensive for Americans. In return, China got a forum to air grievances with Washington.”
• China Cracks Down on Food Safety Violators
  “Beijing has been moving aggressively in recent months to complete a six-month long campaign to root out fake and substandard food, drugs, toys and other consumer goods, after a year of scandals involving product safety.”

QuickTax has become a leading software package for preparing personal tax returns. But will they continue their past success in the 2007 tax year? The recent changes to their pricing scheme have caused a stream of outrage on the Financial Webring Forum.

It seems the plan is to charge $59.99 for the Platinum version of the software (the most flexible package) which allows for preparation of two (2) returns. This is as compared to the 2006 Standard version which covered “virtually all tax situations”, allowed five (5) returns, and sold for $39.99.

I for one will be switching to a cheaper CRA Certified alternative.

The Investment Industry Association of Canada has put together a great reference document of conventions for calculating prices, interest payments, and yields on fixed income securities.  [Link via PrefBlog.]