Difference between 'split and redemption' of shares and dividend

Question

I own some NetEnt AB shares. The company is listed at Nasdaq Stockholm Stock Exchange and currently one share is worth ~70 SEK.

Today I received a notification from the bank that NetEnt AB has decided on a stock split and automatic redemption on the following conditions:

Split terms: 1:1

Redemption terms: 1:1

Price per redemption share: 2.25 SEK

Preliminary pay-date: 2017-05-31

Trading with redemption shares: 2017-05-10 - 2017-05-23

The redemption shares will be redeemed for the price stated above without any action taken from the shareholder.

It is the first time I encounter redemption programme and I would like to know what are my options here. So far it looks to me like this is very similar to dividend - the company gave me some redemption shares for one month and they will buy them from me at the end of the month.

However if this is the case: how is this different from paying the dividend? And the follow up question: how (and with who?) can I trade these redemption shares during these 2 weeks in May? What is the point of trading them if they have fixed price?

Answer 1

It is the first time I encounter redemption programme and I would like to know what are my options here

You can hold on to the shares and automatically receive 2.25 SEK per share some time after 31-May; depending on how fast the company and its bank process the payouts.

Alternatively you can trade in the said window for whatever the market is offering.

how is this different from paying the dividend?

I don't know much about Sweden laws. Structuring this way may be tax beneficial. The other benefit in in company's books the shareholders capital is reduced.

can I trade these redemption shares during these 2 weeks in May? What is the point of trading them if they have fixed price?

Yes you can. If you need money sooner ... generally the price will be discounted by few cents to cover the interest for the balance days.