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AMC acquisition of CKEC

Questions about updating prices or transactions in Fund Manager

Postby flight » Fri Dec 23, 2016 5:30 am

Mark - can you help with this corporate action? AMC completed its acquisition of CKEC this week.

Terms: $33.06 in cash and 1.0819 shares of AMC stock. allocated 33% stock and 67% cash.

For every 100 shares, I recorded a sell of 33 CKEC @ $33.06. But now I need to convert the remaining 67 CKEC shares into 67 x 1.0819 = 72 shares of AMC. We can ignore the fractional shares (my broker actually gave me a rounded #).

Should I just use the Spin-off function here? Or the Transfer In/Out?

thanks
flight
 
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Postby Mark » Fri Dec 23, 2016 9:20 am

Hi flight,

Do I understand you owned CKEC? If so, you ended up with some cash and some number of shares of AMC, right? So, record a distribution and a split. If you received $X in cash, record a distribution for $X. If you started with 100 shares of CKEC and ended up with 72.5 shares, record a 72.5 for 100 split. For the fractional share, if you received cash for that, record a sell of the fractional share. Finally, change the name/symbol/CUSIP investment properties.
Thanks,
Mark
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Postby flight » Fri Dec 23, 2016 3:57 pm

That's correct, I owned CKEC.

Couple of follow-ups:

1) By changing the name/symbol/cusip, what happens to the historical price? Is there any risk of messing up the previous valuations?

2) Is the right cost basis going to be allocated? Both pieces (the cash and stock) are taxable.
flight
 
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Postby Mark » Fri Dec 23, 2016 4:03 pm

Hi flight,

1) Changing those properties doesn't affect any recorded pricing. You would want to be careful to not retrieve historical prices for this investment for a date range before this event.

2) Since you're not selling anything (except for maybe the fractional share), your cost basis is not going to change in the remaining shares. If the cash you receive is supposed to lower your tax cost basis, record the distribution as a "Return of Capital" type distribution.
Thanks,
Mark
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Postby flight » Fri Dec 23, 2016 4:11 pm

both the cash election and the stock election are taxable events, including cash & stock received. I really sold 33 shares @ $33.06. I am concerned doing the distribution and split may distort things....

The exchange of shares of Carmike common stock for cash and/or shares of AMC Class A common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes to U.S. holders (as defined in "Proposal 1—Adoption of the Amended and Restated Merger Agreement—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 100 of this proxy statement/prospectus). If [color=#FF0000]you are a U.S. holder and your shares of Carmike common stock are converted into the right to receive the merger consideration, you will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (i) the sum of the amount of any cash received, plus the fair market value (determined as of the closing date of the merger) of any shares of AMC Class A common stock received, with respect to such block of shares of Carmike common stock and (ii) your adjusted tax basis in such block of shares of Carmike common stock[/color]
flight
 
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Postby Mark » Fri Dec 23, 2016 4:28 pm

Hi flight,

I read that explanation to say you would have to pay taxes on any gain, as measured by how much cash you get, plus the cost basis of your new AMC shares, as compared to your original cost basis in CKEC. So, if you had $1,000 cost basis in CKEC, and after this you had $100 cash and $900 basis in AMC, your taxable gain is $0.

Maybe you can give an example using numbers. For example, what was the original cost basis in CKEC? How many shares did you have? How much did you receive in cash? What is your new cost basis in AMC? How many shares of AMC do you have? If you can detail exactly what you started with, where you ended up, and what you're expecting to see in realized gains/losses, I can help better.
Thanks,
Mark
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Postby flight » Fri Dec 23, 2016 4:46 pm

I don't think your reading is how it is actually occurring. It states: The exchange of shares of Carmike common stock for cash and/or shares of AMC Class A common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes to U.S. holders.

I have altered the actual cost basis for simplicity but here are the details.

Originally owned 1,000 shares of CKEC. Let's say cost basis is $20 per share, so $20,000

Received $33.06 per share in cash for 671 shares. Total cash received = $22,183
For the remaining 329 CKEC shares, received 356 shares of ticker AMC (per the 1.0819 ratio).

Realized gain in 2016 (note, my broker has already reflected this on the gain/loss page).
Proceeds = $22,183; Cost = 671 x $20 = $13,420. Gain = $8,763

Cost basis of the 356 shares of AMC stock = 329 CKEC shares x $20 = $6,580

In turn, the cost basis of $13,420 + $6,580 add up to the original $20,000
flight
 
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Postby flight » Fri Dec 23, 2016 4:58 pm

Also, please note the merger consideration required a cash or stock election. Therefore, some CKEC shareholders received 100% cash, while others received combination of stock and cash.

Thus the cash component is definitely a taxable event.

Each Carmike stockholder will have an opportunity to make an election to receive the cash consideration or to receive the stock consideration for each share of Carmike common stock they own. This election is subject to proration so that 70% of the total issued and outstanding shares of Carmike common stock will be converted into the right to receive the cash consideration and 30% will be converted into the right to receive the stock consideration
flight
 
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Postby Mark » Fri Dec 23, 2016 5:22 pm

Hi flight,

Thanks for the example numbers, that makes it easier to follow. For that example you would record:

- Sell 671 CKEC for $22,183
- Either record a split, or a Transfer to deal with the 329 CKEC -> 356 AMC.

If you choose a split, record it with a ratio of 356 for 329, and then change the investment properties. Since you're changing the symbol, make sure to not retrieve historical prices for this investment from before the event.

If you choose a transfer, use the "Transfer Between" wizard to help you transfer all your shares from the CKEC investment to a new AMC investment. Right mouse click on your CKEC investment, and choose "Investment Data / Transfer Between...".

Either the split or transfer method will work, and there are benefits to each approach. With the split, it is simple, and maintains the full performance history in a single investment. With the Transfer Between it creates a more obvious change, and eliminates the concern of accidentally retrieving historical prices for the pre-split date. Both will give the same overall performance and maintain the correct cost basis, so it is more a matter of personal preference on how you record this part.
Thanks,
Mark
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Postby flight » Fri Dec 23, 2016 5:44 pm

Great thanks Mark!
flight
 
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Postby flight » Fri Dec 23, 2016 6:34 pm

Last question from me on this.

Does it matter what day I do the Transfer Between (Transfer In/Transfer Out)?

Meaning the last day in which CKEC traded was Dec 20th, closing price $33.40. However, my brokerage only credited the shares on December 22nd. During that time the price of AMC went from:

12/20: $33.45
12/21: $34.70
12/22: $35.10

When I book the transfers as of 12/22, and then book as of 12/21, I get slightly different YTD TWRs. I feel like there is some performance slippage if I book it on 12/22 at the higher price, but in reality, my TWR should benefit from the appreciation in price on 12/21 as well.

While a minor different for sure, I just want to get to the truthful & accurate number.

thanks
flight
 
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Joined: Sun Jul 27, 2014 11:03 am

Postby Mark » Sat Dec 24, 2016 8:25 am

Hi flight,

It only matters in terms of allocating individual performance between these 2 individual stocks. As long as you enter the market value correctly on the date of the transfer, the overall effect to the portfolio will not change.
Thanks,
Mark
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Postby flight » Sat Dec 24, 2016 11:41 am

Hi Mark - I need to push back on that because when I simply change the effective date from 12/21 to 12/22, I get different TWRs even though the market values are the same?

The transfer in/transfer out functionality is very sensitive to these things.
flight
 
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Postby Mark » Sat Dec 24, 2016 2:27 pm

Hi flight,

Are you looking at the TWR of the whole portfolio, containing both of these investments? The TWR of AMC and CKEC will vary depending on the date you do the transfer, but at the portfolio level that includes both of them they should be the same.

Is the sum of the market values for all Transfer In transactions equal to the sum of all market values for Transfer Out transactions, and all for the same date?

Are the market values of the transfers equal to the market value of the investments?

Is the beginning value the same for both cases? Ending value?

All of these should be the same for the 2 different cases you're looking at. The date you transfer should not affect the beginning/ending values. Also, the market values of the transfer ins should equal the market values of the transfer outs.
Thanks,
Mark
Fund Manager - Portfolio Management Software
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Postby flight » Tue Dec 27, 2016 5:41 pm

Are you looking at the entire portfolio? Yes, looking at the entire portfolio.

Do the market values equal? Correct, the sum of the MVs for the transfer in equals the transfer out.

Are the MVs of the transfers equal to the MVs of the investments? No. The acquisition closed on the 20th of December, and subsequently on the 22nd, the shares were credited for the stock component of the acquisition. During that period, shares of AMC (which CKEC shareholders received), appreciated as shown below:

12/20: $33.45
12/21: $34.70
12/22: $35.10

I think I need to backdate everything back to the 20th, so I can make sure I receive the appreciation in between these dates? But I will await your recommendation.
flight
 
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