How do we account for the 11/1/16 Arconic distribution and name change for Alcoa?

Concordman

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

Received the cost basis & lot info for AA over the weekend. Added the lots manually ..All set

q_lurker

q.lurker said:

(Sorry for the slow response, mshiggins.  Life gets in the way sometimes.)

For me, the first question the user/investor needs to answers is:  What companies do I want to continue to be reflected in my Quicken data?  The two possible answers are:

1. The old original Alcoa Inc, the new Arconic and the new Alcoa Corp, or
2. Only Arconic and the the new Alcoa Corp.  

The second is the 'proper' real world answer as officially what was Alcoa Inc got renamed to Arconic.  You accomplish that in Quicken by executing a Corporate Name Change or by more simply editing the Security Detail and changing the name.  The drawback to that name change process is that all transactions in Quicken that used that original Alcoa Inc. name will now read as Arconic transactions.  That is, the user bought X shares of Arconic 3 years ago rather than X shares of Alcoa Inc.  

Some users may not like that presentation and may want the historical transactions to reflect Alcoa, Inc with only new going forward transactions reflecting the Arconic name.  Those users will want to use a Corporate Acquisitions transaction whereby Arconic acquires the shares of Alcoa, Inc.  This approach may have ramifications on investment performance reports and calculations within Quicken.  

I am going to proceed on the basis of the second option and here is how I would handle it.  (Note I am not an owner of Alcoa/Arconic shares, nor am I an investment professional, yada, yada, yada.  Do your own due diligence.    

Step 1 - Change name to Arconic:  Edit the security details for the Alcoa Inc security you have in Quicken.  Change the name to Arconic.  Change the ticker to ARCN.  Choose the options to copy the old (AA) prices to the new ticker and to delete the old (AA) prices.

Step 2 - Create a new Alcoa Corp security:  I would work from the security list, new security, Ticker symbol AA, Name Alcoa Corp.

Step 3 - Spinoff Alcoa Inc shares from Arconic:  I dislike the Quicken Corporate spinoff action primarily because of its backdating history-changing approach.  For this type of case then, I prefer to enter transactions more manually.  First, it is necessary to determine the allocation of the original Arconic (old Alcoa Inc) cost basis to the two companies - Arconic and Alcoa Corp.  Several other posts have already presented information in that direction.  Arconic will be publishing a Form 8937 in the coming days preseting their view on that calculation.  Based on the 1/3 share ratio and prices like 18.92 for Arconic and 23 for Alcoa Corp, the split should be about 71% / 29% with Arconic keeping the larger protion of the basis.  DO YOUR OWN CALCULATIONS or RELY ON YOUR INVESTMENT PROFESSIONALS!

a) Remove all shares of Arconic noting the original basis and acquisition dates for each separate lot.
b) For each separate lot, enter an Add Shares for the original number of Arconic shares in the lot with that lot's acquisition date and about 71% of that lot's basis.  Enter a second Add Shares for the new Alcoa Corp shares, 1/3 as many as in the original lot, about 29% of the original basis, and using the original lot's acquisition date.  I am always inclined to keep the share quantity to 3 decimal accuracy and to occasionally round 'differntly' to end up at the right total number of shares.)

(Sidebar 1:  For those choosing the three company option from my beginning question, you can process here as Remove Shares of the old Alcoa Inc, and then Add Shares for Arconic and for Alcoa Corp effecting the Corporate Acquisition in that manner.)

(Sidebar 2:  For those of you with many lots, perhaps from DRPs, there are techniques to generate the base Add Shares transactions such that you only need to edit those transactions to get the correct basis established.  Four or five lots - not worth the trouble; 20 or 30 lots, ask about it.)

When you are complete with the Add Shares transaction, you may have a fractional share of Alcoa Inc. shown that is not reflected in your brokerage data.  Sell the fractional share for any cash-in-lieu you received.  

Closing comments:  I do not necessarily trust the brokerages to get this sort of thing right the first time.  You should have a basis here for questioning what they are telling you.  Conversely, once you trust their data, you can tweak these transactions as necessary to get them to agree with your brokerage data, if that is important to you.  

Look for the Form 8937 data on the Alcoa and Arconic websites to further validate or guide what you are doing here.  

HTH

The 8937 forms for the two parts of the transactions are now available through this site:  http://investors.alcoa.com/information-request/stockholder-information though the forms are not as helpful as other companies have provided for similar transactions.  The one for the reverse 1-for-3 split is self-evident, just like any other such split.  

The form for the Alcoa Corp (AA) distribution simply cites that the determination of fair market values for the two companies is the investors responsibility and one method would be to average the hi and lo trading prices on November 1 for each company.  Tom Young presented those values in a prior post (though he chose to use closing prices for FMV determination, an equally valid calculation IMO).  

Unknown

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

I had 3750 shares of the old Alcoa
I received 1250 shares of the new Alcoa and 416 shares of Arconic in exchange.
Is this correct?

Concordman

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

1250 shares of ARINC & 416 shares of AA 

q_lurker

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

@Arthur Olive:  "Is this correct?"

Does not sound correct to me.  From the press release cited and linked above:

Alcoa Inc. shareholders today (i) receive one share of Alcoa Corporation common stock for every three shares of Alcoa Inc. common stock held as of the record date of October 20, 2016, and (ii) retain their shares of Alcoa Inc., which due to the name change of Alcoa Inc. to Arconic Inc., are now Arconic Inc. shares.

That says to me that if you started with 3,750 shares of Alcoa Inc. then you should have ended with 1,250 shares of Alcoa Corp (a new company with the ticker AA) and 3,750 shares of Arconic (the old Alcoa Inc, now renamed and with the ticker changed to ARNC).  You (or they) have got the first part right.  I don't know where the 416 shares of Arconic is coming from.  

Concordman

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

Before the New company spin off Alcoa approved a 1:3 reverse stock split.So if you owned 3750 shares of AA after the reverse split you owned 1250 shares of AA. The new company  is called Arconic (ARNC). So you own 1250 shares of ARNC ( see my comments above 1 mo ago provided by my Fi). 

1250 shares x 0.3333 (the multiplier provided by Alcoa ) yields 416 shares of Alcoa

So you have 1250 ARNC & 416 AA.

q_lurker

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

OK, I am clearer now.  

@Arthur Olive:  WHEN did you have the 3,750 shares of Alcoa Corp?  If your end of September (or prior) statements showed you with that share quantity trading in the $10 range for a market value of 37,500 or so, then as Concordman indicates, 1,250 Arconic (ARNC) and 416 Alcoa Inc (AA) are correct.  (You had the companies reversed from that in your post.)  You would also be due cash-in-lieu of the fractional 0.67 share of Alcoa Inc., about $15.

If the 3,750 shares was from a statement after 10/6/16 (after the 1-for-3 Alcoa Corp split with trading values in the $30/share range), then your citation of 1,250 Alcoa Inc shares would be correct but the 416 for Arconic shares would not be correct.  

I suspect the first case is applicable and you simply mis-matched the companies and share quantities.  

Unknown

Thank you Cordsman and Q. Linker, this put me at ease.
I mismatched the companies and share quantities.

Unknown

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

Did I do Mine right- or rather is it also correct? I've own Alcoa Inc (old) more than 10 years and the thought of manually entering all those lots and drips etc makes me ill. It's in my Roth account- thankfully- so the lots are bonus info and more beneficial for knowing the basis and rates of return etc.for us OCD types. 

1. on Oct 6, 2016- old Alcoa Inc. reverse split 1:3

2. On November 1, 2016- name change to Arconic Inc.

3. On November 1, 2016 add new security to the list- Alcoa Corporation (new)

4. On November 1, 2016 Corporate Spin-off of Alcoa Corp (new) from Arconic 1:3 (.3333 per old share)  (ARNC= $18.92 ; AA = $23.00)

5. Nov 1, 2016 Remove shares Alcoa Corp (new)

6. Nov 1, 2016 Add shares Alcoa Corp (new) -

steps 5 and 6 are to set the basis for the New Alcoa company as of the date of the spin off.  Arconic Inc $18.92 at close and Alcoa Corp (new) $23 at close of 11/1/2016.

The Arconic Inc carries all the original lots and basis generated by the old Alcoa Inc. as this was simply a name change

The Alcoa Corp. (new) basis starts with Lot one $23.00 on Nov 1, 2016.

q_lurker

Concordman said:

Just learned the following from my Fi:

the ARNC cost/lots have already been attributed to their systems, because the new ARNC carries the exact same lot information as the original AA shares purchased (everything has already been adjusted for the 1:3 stock split in October.    This leaves the cost basis lots for the new AA shares.   They will have multiple lots exactly like the ARNC shares show, however the cost/share price for the lots has not been updated yet.   The Fi is waiting for the conversion ratio to use on the AA shares, this will come from Alcoa.  Once this has come from Alcoa, the Fi will automatically update  cost basis lots on AA.     keep the downloaded cost basis lots on the ARNC you received, those are accurate.    You will just have no data on AA shares until we receive the information.  Could take a few weeks, as we have to wait for Alcoa to send it to our cost basis reporting department.  

@Annie Lohman:  Right (unfortunately) is a little subjective; dependent on what your specific needs are.  I would not have used your step 4, because I do not like the way the timing comes out on those generated transactions.  Others (perhaps you) are ok with the backdated transactions.  

I am not clear on what your steps 5 and 6 accomplished.

Example:  

• on 10/1/16 owned a total of 300 shares of Alcoa Inc (old) with cost basis = $100 and various acquisition dates

then

• on 10/6/16 this would have changed by the reverse split to owned a total of 100 shares of Alcoa Inc (old) with cost basis = $100 with no change to the acquisition dates

After the transactions of Nov 1, the holding should have been

• on 11/1/16, owned 100 shares of Arconic with cost basis = about $71 and same set of acquisition dates (the actual value depends on the two prices you use; your citation of 18.92 and 23 would yield 71.16)
• on 11/1/16, owned 33.333 shares of Alcoa Inc (new) with cost basis = $29 and same set of acquisition dates (parallel note about the $29 value - depends on values chosen)

Soon after 11/1, you may have received cash-in-lieu payment.  For that you would be selling the 0.333 shares of Alcoa Inc (new) for that cash-in-lieu amount.  That brings your Alcoa, Inc holding to an integer value.  There may have been a similar event following the 10/6 reverse split.

There is no setting of the new basis to $23/share nor setting of the acquisition dates to 1/1/16 if that is what your steps 5 and 6 did.