Investment - Spin-off

Chuck's Avatar

Chuck

07 Sep, 2009 08:09 PM

How do I record a spin-off on an investment? For example, Tyco, International spun off 2 separate companies and associated stocks - Tyco Electronics & Covidean Limited.

  1. 1 Posted by Brian Adler on 11 Sep, 2009 05:31 PM

    Brian Adler's Avatar

    Chuck,

    How did the spin off work? What was the formula? I looked online but didn't readily find the answer. Did your Tyco shares convert to the spun off companies shares or did you receive shares from the spun off companies in addition to your Tyco shares or did some percentage of your Tyco shares convert into the spun off companies shares? I should be able to advise you how to best record it after knowing that.

    Best,

    Brian Adler

    Moneydance Support

  2. 2 Posted by Chuck Linn on 12 Sep, 2009 01:34 PM

    Chuck Linn's Avatar

    Brian,

    Here's an article that describes a specific spin-off at Tyco:

    http://www.devicespace.com/news_story.aspx?NewsEntityId=59370

    They can vary greatly. Here's another spin off scenario at Viacom/CBS:

    https://schwabpt.com/downloads/docs/resources/actions/library/VIAB_CBS_03Jan
    06v3.pdf

    Does that help?

    Chuck

    Chuck Linn
    972.679.4298
    [email blocked]

  3. 3 Posted by Brian Adler on 17 Sep, 2009 08:09 AM

    Brian Adler's Avatar

    Chuck,

    This article seems to suggest that in lieu of shares received in the spun off companies, you will (or have) receive(d) a cash dividend. Is that your understanding? If that is the case, you can simply make a dividend transaction from your investment account's register.

    Brian

  4. 4 Posted by Chuck Linn on 17 Sep, 2009 10:48 AM

    Chuck Linn's Avatar

    Brian,

    The cash would be provided in lieu of fractional shares. Full shares (whole
    numbers) were still distributed on this spin-off.

    Chuck

    Chuck Linn
    972.679.4298
    [email blocked]

  5. 5 Posted by Chuck on 17 Sep, 2009 11:00 AM

    Chuck's Avatar

    The original transaction was a BUY of 500 shares of Viacom, Inc. Class B (Old) on 11/08/2005.
    January 4, 2006 - Viacom, Inc. split the shares into 2 companies:
    - 250 shares of CBS Corporation Class B - 250 shares of Viacom, Inc. Class B (New)

    Chuck

  6. 6 Posted by Chuck on 17 Sep, 2009 11:11 AM

    Chuck's Avatar

    Another Example would be Tyco, International:

    Bought 850 shares of Tyco International, Limited (TYC) on 2/2/2006.
    7/6/2007 - distribution/spin-off:
    - 212 shares of Covidien Limited (COV) - 0.5 share of Covidien paid in cash - 212 shares of Tyco Electronics, Limited (TEL) - 0.5 share of Tyco Electonrics paid in cash

    Each Tyco International shareholder will receive one common share of Covidien Ltd. and one common share of Tyco Electronics for every four common shares of Tyco International held at the close of business on the record date.
    Fractional common shares of Covidien or Tyco Electronics or Covidien will not be distributed and any Tyco International shareholder entitled to receive a fractional share will instead receive a cash payment.
    Immediately following the distributions, Tyco International's shareholders will own 100% of the common shares of Covidien and Tyco Electronics.

  7. 7 Posted by Brian Adler on 18 Sep, 2009 09:25 PM

    Brian Adler's Avatar

    Chuck,

    In the case of Tyco, I believe the best way to record this (and I should concede that Moneydance isn't yet designed to fully support corporate spin offs) is to issue a dividend and then use the cash from the dividend to purchase the shares of Covidien.

    In the case of Viacom, you should enter a sale of the 500 shares (you should adjust the sale price to make it the same as your cost basis for your original purchase) and then a purchase of the 250 shares of Viacom and CBS. You should also make sure the purchase for the new shares equals the value of the previous sale so that everything zeros out. The main thing is to insure you don't record a profit/loss through the process of selling the Viacom and acquiring the new shares.

    I apologize that Moneydance isn't yet natively designed to handle this. Please let me know if you find a problem with this workaround recording these transactions.

    SIncerely,

    Brian Adler

    Moneydance Support

  8. Angie Rauscher closed this discussion on 24 Jul, 2011 07:00 PM.

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