What is a DRIP Group Buy
DRIP Group Buy
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When a DRIP investor decides to acquire their initial share buy using "Broker Method" by buying shares on the open market, the fees can be quite high as shown on the Discount Broker page. One option is for several investors interested in the same company is to organize a Group Buy. The advantage is that any broker fees would be even spread among the participating investors.
The main reason this works is that the Transfer Agents responsible for managing stock certificates will transfer shares to the new owners for free.
The process is the same as the "Open Market/Broker method" described in the Primer, except that the Coordinator buys 1 share for each participant and 1 share for himself/herself. Using the example above for 4 participants and 1 coordinator, the coordinator would buy 5 shares through his/her broker and request 1 stock certificate representing the 5 shares. When the Coordinator receives the stock certificate from the Broker, he would complete a share transfer form to transfer 1 share to each of the 4 participants and mail it all to the Transfer Agent. New 1 share stock certificates would be issued for each participant, which are sometimes mailed directly to the participants or all to the coordinator. Money for the fees and share price would be paid to the Coordinator.
The advantage here is the average trade commission of $28 and the average certificate request fee of $50 would be evenly divided up 5 ways (approx. $16) per person, rather than the whole amount paid by one person.
A friend of mine wrote up a very detailed Group Buy Procedure and checklist to help people organize group buys.
Return to the Canadian DRIP Primer or the Discount Broker Page