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AMC acquisition of CKEC

Questions about updating prices or transactions in Fund Manager

Postby Mark » Tue Dec 27, 2016 5:52 pm

Hi flight,

You can record them for whatever date you think is most appropriate, but you want to make sure that the market values of your transfers are equal, and equal to the market value on the transfer date. So, if you transfer on 12/20, use $33.45 to determine the market value. If you transfer on 12/22, use $35.10.
Thanks,
Mark
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Postby flight » Tue Dec 27, 2016 6:02 pm

So I use the transfer in (received) security, which is AMC? AMC is $33.45. CKEC $33.40

And, remember it was not a 1:1 stock swap? Do I need to calculate the implied CKEC price?

329 CKEC turned into 356 AMC
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Postby Mark » Tue Dec 27, 2016 6:16 pm

Hi flight,

Sorry, I misread that those prices were for the transfer in security. I would record both the transfer in and transfer out on the same date, for the market value of the transferred out shares. If the CKEC shares transferred out on the 20th when the acquisition closed, use that same date for both the transfer out and the transfer in. On the 20th is the market value of 329 CKEC the same as 356 AMC?
Thanks,
Mark
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Postby flight » Tue Dec 27, 2016 6:54 pm

Are you asking is the market value of the 329 CKEC the same as 356 of AMC in my Fund Manager or in real world stock market on Dec 20th?
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Postby Mark » Tue Dec 27, 2016 7:49 pm

Real world. At the time of the conversion from 329 CKEC to 356 AMC I'm assuming the market value of the transferred out shares equals the market value of the transferred in shares at that time in the real world.
Thanks,
Mark
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Postby flight » Wed Dec 28, 2016 9:08 am

at the time of conversion, the market value of the AMC shares ($33.45 x 356) were worth more than CKEC ($33.40 x 329)
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Postby Mark » Wed Dec 28, 2016 10:32 am

Hi flight,

What I said earlier about the portfolio TWR being the same no matter when you do the transfer was incorrect. Sorry for making this more confusing by saying something incorrect. TWR factors out external contributions, and only looks at the intrinsic performance of the object (portfolio in this case). By changing the date where you do the transfer you are changing when each of these 2 investments was owned, and thus the object's makeup is different. For example, if you change the transfer date later, then more of CKEC performance is included, and less of AMC. If you look at the TWR equation the sub-periods will be different when you change the transfer date. Each sub-period is determined between external cash flows, and then combined.

If you look at ROI yields however, what I said earlier would be true. You ended up with the same value, started with the same value, and as long as the market value of the transfer out equaled the market value of the transfer in (and happened on the same date), the ROI will not change no matter the date of the transfer. You can see this by looking at the ROI yield equation.

So, you would need to decide when you want to move your portfolio from owning CKEC to AMC. I would suggest this date should be 12/20. Whatever date you decide, record both the transfer out and transfer in on this date, and the market value of the transfer out should equal the market value of the transfer in, as they were worth the same at the moment of the transfer, and no market value was added to or removed from the portfolio due to this transfer. This will ensure an accurate ROI. The market value of the transfers does not have to be the same as the closing market value, but they should be the same as each other. I would probably choose to make the market value equal to $33.06 * 329, as this was the value of the CKEC shares when redeemed for cash.
Thanks,
Mark
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Postby flight » Wed Dec 28, 2016 2:40 pm

Thanks for the clarification Mark! No worries.
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