Re: 3Com /Palm Spinoff
In Reply to: 3Com /Palm Spinoff posted by Brendan Collins on July 28, 2000 at 22:08:03:
: 3Com just spun off Palm Computing. The ratio was 1.4832 shares of PALM for each 3COM with cash for partial PALM shares remaining.
: Any ideas on this one??? I searched for the topic on your board with no luck.
: Thanks - Brendan Collins
I've copied it here:
How to Handle Stock Spin-Offs
First, record a "return of capital" distribution in the parent investment. This reduces the basis of the parent company by the amount of the spin-off, while maintaining a constant number of shares owned.
Next, create a new investment for the spun-off child company. Record a purchase in this new investment for the amount of the spin-off and with the received number of shares due to the spin-off. If you received cash for a fractional number of spun-off shares, rather than fractional shares in the child company, record this as a sell transaction in the child investment for the fractional number of shares.
Assume you owned 45 shares of Pepsi. Assume Pepsi spun-off Tricon, and every stockholder of Pepsi received 1 share of Tricon for every 10 shares of Pepsi they owned. You were informed that from the spin-off you received $147 worth of Tricon stock. To handle this you would record a return of capital distribution in Pepsi for $147.
Next, if you don't already own Tricon, create a new investment (File/New Investment) for Tricon. Record a purchase transaction for 4.5 shares of Tricon with a value of $147. The 4.5 shares is because you owned 45 shares of Pepsi, and the spin-off was 1 share of Tricon for every 10 owned in Pepsi. Assuming you ended up only really owning 4 shares of Tricon and were paid cash for the remaining 0.5 shares, record a sell transaction in Tricon for the 0.5 shares, at the same per share price as the previous purchase.
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