DowDupont Corteva spin off will consist of 3 transactions: Spin-off, Corporate Name Change, and a re

DowDupont Corteva spin off will consist of 3 transactions: Spin-off, Corporate Name Change, and a reverse split. In what order should the transactions be entered?.

Comments

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited June 2019
    This is a "popular press" description of the deal:

    "On June 1, 2019, DWDP is going to spin off its agriscience subsidiary, Corteva, Inc. to DWDP shareholders. The Corteva shares will trade on the NYSE under the symbol "CTVA." DWDP will operate as "DuPont". DWDP will implement a reverse share split (i.e. reduce its shares outstanding) and change its trading symbol to "DD" from "DWDP".
    If that's an accurate description of events then the easiest order of entry would be the same: Spin off, Name change, reverse split.  From an accounting standpoint the spin off and reverse split affect the dollars and are the most important entries.  Assuming the sequence described is correct then the reverse split should follow the spinoff.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    a)  Name Change -- What is it you want?  The built-in security name change simply renames the security and that applies to ALL prior transactions as well as future transactions.  If that is acceptable to you, you can make the change any time (any order).  If you want your historical transactions to represent DowDuPont and future transactions to reflect DuPont de Nemours, then you need an alternate approach that creates a new security.  

    b)  Spinoff -- You can't really do anything for the spinoff until June 3 trading values get established.  You need the Fair Market Values for Corteva and DuPont immediately after the split to determine the allocation of basis to the two of them.  I often suggest waiting until the Form 8937 is published which could be a week to 6 weeks down the line.  

    The Spinoff action in current Quicken releases (QW2017 and later) will generate a Remove Shares transaction and a series of Add Shares transactions for both Corteva and the original company.  That offers a relatively easy way to effect the name change at the same time and keep historical distinction of the names.  That is, you can have DowDuPont spinoff Corteva generating Add Share transactions for both of those, then simply edit the Add Shares for DowDuPont to be Add Shares for DoPont de Nemours - the renamed company.  

    c)  Reverse split -- It will certainly be 'cleaner' to do the reverse split after the spinoff, but I think you could also do it 'before' if you are careful.  Apparently you get 1 Corteva  for every 3 DowDupont shares and then DowDuPont splits 1 for 3.  If you chose to do the reverse split first, then the ratio for the spinoff would become 1-to-1.  

    The other factor through all of this is historical investment performance meshed with what happens ongoing.  Keeping as two companies (DowDuPont/DuPont de Nemours by whatever name and Corteva) versus three companies may impact how you are used to seeing investment performance information.  

    I suggest you create a copy of your Quicken file and try some approaches to see what makes sense for your needs and understandings.  When you find the right approach for you, you can then implement that in your working file.  
  • boris52
    boris52 Member ✭✭
    How do I record the Dow DuPont Breakup. The spin off of the new company is relatively simple, but I already have a stock with the symbol DD (duPont pre merger with Dow) So I cannot reuse this symbol. Can I somehow inactivate it and create a new stock with the DD symbol? Not sure how to Proceed
  • boris52
    boris52 Member ✭✭
    I think I hit upon a way, though I if there is a better one, I am interested. After recording the spin off of Corteva and Dow, I recoreded the 1:3 Split in DowDuPont , then a 1:1 Corporate acquisition by DuPont De Nemours which converted my Dow DuPont shares to DuPont De Nemours with the DD symbol.
    Complicated? Yes but so was the breakup.
  • Ed Duncan
    Ed Duncan Member ✭✭
    How do you determine the cost basis of Corteva and Dupont if you started all this changing with Dow stock only from many years of dividend reinvestments?
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Ed Duncan said:
    How do you determine the cost basis of Corteva and Dupont if you started all this changing with Dow stock only from many years of dividend reinvestments?
    How would you be determining the cost basis of the Dow stock if you had sold it?  If you don't have suitable records in Quicken or on paper to begin with, that is an issue for you to address.  Quicken can't make up the necessary info.  

    Going back to the Dow DRP plan administrator may provide you with the information.  Or you wing it and go with your best estimates.  

    Good Luck
  • Ed Duncan
    Ed Duncan Member ✭✭
    I know the cost basis of the Dow I had. Say 1500 shares with cost basis of $45,000. The question is how is that spread between the new Dow, Dupont , and Corteva? Does quicken manage that?
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited July 2019
    Ed Duncan said:
    I know the cost basis of the Dow I had. Say 1500 shares with cost basis of $45,000. The question is how is that spread between the new Dow, Dupont , and Corteva? Does quicken manage that?
    If you have the full starting point information in Quicken and enter the right data in the Corporate Spinoff action wizard, Quicken will allocate the right cost basis to each lot of both companies (the original and the spinoff). 

    The key data for the spinoff wizard are the fair market values or the two companies immediately after the spin-off.  Basically, those would be June 3 trading values.  As far as I can see, the Form 8937 for the deal has not yet been issued, but even that is just their opinion.  You or your brokerage might choose somewhat different values than those shown on the 8937. 

    I would suggest you make a copy of your data file and use that to 'practice' the entries to see how they work. 

    Post back with more specific questions or more specific data if need be.   
  • mla302
    mla302 Member ✭✭
    I don't understand why my brokerage statement does not give me the information i require to enter these complicated transactions in quicken. I do not download transactions because I want to understand what's happening.
    2 questions:
    1. The numbers I think I should use in Corp Spin-off transaction are $24.81 for Corteva & $76.10 for DD on 6/3?
    2. To change the ticker symbol from DWDP to DD, I can just edit the security, but that seems like it will mess up my historical DWDP also?

    Argh. Wish I'd just sold my DWDP shares in March!
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    On June 3, CTVA traded at Open = 26.54, Hi = 27, Lo = 24.37, and Close = 24.81.  Anything on those areas could be justifiable and that would include your value of 24.81.

    Similarly the DD trading values on June 3 were Open = 65.67, Hi = 76.10, Lo = 65.50, and Close = 76.10.  I believe those are values after the 1-for-3 reverse split was factored in.  So likewise your suggested value of 76.10 is understandable only if the reverse split is executed first.  and the spinoff is done at a 1:1 ratio. 

    But your brokerage and DD/CTVA could end up using different values. 

    ASSUMING you started with 3 shares --- 
    With your values, after the spinoff and reverse split you would have had 1 share of CTVA worth 24.81 and 1 share of DD worth 76.10 for a total value of $100.91.  The CTVA portion would have been 24.586% (24.81 / 100.91) and the DD portion would have been 75.414% (76.10 / 100.91).  Your original cost basis (per lot) would be allocated to those two ongoing securities in those respective percentages.  Coincidentally (?) those are the percentages shown on the costbasis.com website for this deal also.     

    I would suggest you try those values on a copy of your file (or with a good backup at hand) and see how the basis allocation generated by those values corresponds to what you brokerage is now showing for basis of those holdings. 

    As I explained (or tried to) earlier in this discussion, you have a choice with respect to the DowDuPont security.  One option is the rename/reticker approach.  That will revise names on historical transactions but the financial side (values) will be maintained in an accurate representation.  Option 2 is to create the new DuPont security (DD) and have it acquire the prior DowDuPont security 1:1 after the reverse split.    

    Again, with a good backup or copy at hand, try the re-ticker approach copying the prior prices to the new ticker. That is the approach I would likely use.  If you don't like or understand the results, try the other option.
  • Geobrick
    Geobrick Member ✭✭
    For the corporate name change, would it be cleaner to do a remove/add where we remove DowDupont and add it back as Dupont (with the new symbol)? That would maintain the historical data. The only thing lost would be any kind of historical performance data on the new stock name since it's no longer linked to the data associated with the old name. (I remember having similar issues with the ATT/SBC situation).
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @Geobrick:  Yes, I think the Remove/Add pairing can be effective for this type is situation.  For me, it is all about what works best for any specific user.

    If you keep it as one security, then you will have a proper price sequence and performance history will generate easily.  On the spinoff date, the pricing (value) of the holding will drop by about 25% reflecting the 'removal' of Corteva from the value of the original holding.  That security by itself will show negative performance across that date.  When looking at the original company and Corteva as a combination, the value and performance should be realistic.  (I am using 'performance' in this context very generically and not specific to any one or more Quicken measures of performance.  Individual Quicken performance parameters may not handle this type of transaction smoothly.)

    If one processes this as three companies (DowDupont, then DuPont and Corteva), then the aggregate performance evaluation needs to be inclusive of all three components.  

    Where I see a particular 'ease' of the Remove/Add pairing you suggest is within the results of the Corporate Spinoff action.  Starting with DowDupont, the spinoff action will generate the Remove Shares of DowDupont and the Add Shares of Corteva and DowDupont.  To go your direction is simply editing the Add Shares generated for DowDupont to make them instead Add Shares for DuPont.  (Hope that makes sense.)
  • Geobrick
    Geobrick Member ✭✭
    @q_lurker - Yes that's what I mean but I was going to do a separate add/remove of dowdupont/dupont after the corteva spinoff. Your method saves the extra transactions. You make a good point about not being able to properly track performance in either case becuse tracking DowDupont performance without including Dow or Corteva doesn't really tell us anything.
  • tvicki
    tvicki Member ✭✭
  • tvicki
    tvicki Member ✭✭
    That link just above gives one access to:
    2019
    -Letter to Shareholders which starts with ---Important U.S. Federal Income Tax Information for Shareholders Concerning the Corteva, Inc. Company Stock Distribution and DuPont One (1) for Three (3) Reverse Stock Split
    -Form 8937 Signed
    -Form 8937 Attachment
    They are all very informative.
  • tvicki
    tvicki Member ✭✭
    I started with 531 shares of DowDuPont Inc w/Cost Basis of $6,209.22.
    I have only done the Spin-Off so far.
    I selected the Corporate Securities Spin-Off
    I dated it 6/1/2019 (Schwab used trade dte 6/1 and settle dte 6/3)
    For the "Security Name" I selected DowDuPont Inc
    For the "New Company" I entered Corteva Inc
    For the "New shares issued" I entered .333333
    For the "Cost per old share" I entered 24.98
    For the "Cost per new share" I entered 26.15

    It Added 176.9998 or something shares of Corteva and didn't round up to 177, Since I know that 531 shares divided by 3 = 177 shares I went ahead and edited it to 177 shares. The Cost Basis was fine showing $1,606.20
    I see that I will need to add the symbol CTVA as it didn't ask about it but it did add Corteva Inc to the "Security List".

    It Added 531 shares to DowDuPont Inc with the correct Cost Basis of $4,603.02.
    It also Removed 531 Shares with the Cost Basis of $6,209.22

    Thus the Cost Basis of Corteva $1,606.20 plus the Cost Basis of DowDuPont $4,603.02 = $6,209.22 which is correct at this point.

    Now I believe that all I have left to do is the following:
    Edit the Add shares of DowDuPont Inc and change it to DuPont De Nemours Inc
    Then do the Reverse Stock Split by doing the following:
    Select Stock Split
    For the "Transaction date" will enter 6/3/2019 (Schwab used it for both Trade & Settle dte)
    "Security name" will enter DuPont De Nemours Inc
    "New shares" will enter 1
    "Old shares" will enter 3
    "Price after split" ? is this really the price or the Cost? I think I should enter Cost of $26.00576 and then 177 shares X $26.00576 = $4,603.02 ($4,603.01952 which I hope rounds up to $4,603.02).
    I would expect to end up w/177 shres of DuPont De Nemours Inc although if it doesn't round correctly I may have to edit it. Can I edit number of shares?
    Will it do it as a Remove 531 shares and Add 177 (or a number not rounded) shares or does it do something else? I guess it's been awhile since I've done a stock split.
  • tvicki
    tvicki Member ✭✭
    In thinking about it more it seems the split will come up with the correct number of shares of 177. It is 1 share for every 3 shares and 531 divided by 3 is 177. Also I only have 1 lot.
    I'm beginning to remember that at some time in the past it had trouble with more than 1 lot and I had to Remove and Add Shares to get the correct cost basis.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @tvicki. The price prompt for the split is the closing price on that date; not the cost basis price. Although as I recall Quicken requires a value, I do not believe the value is critical to a calculation. 
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @tvicki. Your other option — as you edit the name on the Add Shares, you can also edit the shares from 531 to 177, and then skip the stock split transaction completely. 
  • tvicki
    tvicki Member ✭✭
    @q_lurker Thank you!
  • Since1996
    Since1996 Member ✭✭
    For these complicated financial transactions, I fallback on Add & Remove Shares. I have had trouble in the past with trying to use name changes, splits and spin-offs directly as Quicken transactions.

    What I care about is maintaining the cost basis for tax reporting and matching account statements. Daily account values end up maintained and investment reports end up good enough.

    Given your original cost basis, the key is to get the reallocation percentages from the shareholder letters and ignore the stock fair value prices in the letters. I have learned to let Quicken fetch and/or calculate security prices for almost all entries. (I realize the percentages originally came from stock prices.)

    First, I add the 3 new securities to the security list: DOW, CTVA, and DD.

    For 4/1/19, we have 66.438% for DWDP and 33.562% for the new DOW company.

    So for 4/1/19, I have a Dow Add Shares followed by a Sold for the Dow fractional share. I left the cost basis of DWDP wrong until 6/5/19, since I was not selling it, a short-cut.

    For 6/1/19, we have 74.13195% from the recalulated DWDP cost basis from 4/1/19 applied to DD and 25.86805% for the new CTVA company.

    So, for 6/1/19, I have Add Shares for Corteva (CTVA), a Remove Shares for DowDupont (DWDP), and an Add Shares for Dupont (DD), then a Sold fractional share for Corteva, and finally a Sold fractional share for Dupont.

    The cash-in-lieu-of-fractional-share resulted from the orginal holding not divisable by 3. All the Add Shares above included the fractional share in the number of shares added but then the fractional share was sold.

    After all this Quicken and the paper brokerage statement matches for June. Success. But the paper statement does not have per share cost or capital gain information.

    One of the brokerage online screens has per share cost basis. I compared that to what Quicken thinks the per share cost is. They match to within a fraction of a cent. Success.

    When I sell any or all of the companies, I will use the capital gain as reported by the brokerage company on my tax return. This exercise validated the brokerage company cost basis reporting as correct and my manual Quicken updates as correct.
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