Valaris Bankruptcy - Entering in Quicken

Geobrick

I had shares of Valaris PLC (VAL) which declared bankruptcy about a year ago. The shares were then listed as VALPQ. Upon emerging from bankruptcy legacy shareholders were offered warrants for the new company, Valaris LTD (VALWS). The ratio was one Warrant for every 36.3669259 shares of the Legacy Valaris. The exercise price is $131.88 and expires in 2028. The current price of VAL is $30 so there's no point in exercising the warrant now.

How would you enter this in quicken? My assumption is to sell VALPQ for $0 and at some point, if it ever makes sense to exercise the warrant, I'll enter it as a buy at $131.88.

Also, when I received the 1:36.3669259 shares of the warrant shares, they had a market price of $2.85. I even received cash in lieu of the fractional share. How does a warrant with such a high exercise price have any value (unless it's like options). Do I enter the Warrants as an "add shares" with a basis of $0. Should it have the same purchase date as the original shares?

I'm sure there are several different ways to handle this.

Sherlock

Based on my understanding from the Form 8937, I suggest entering the sale of all the VALPQ holdings on April 30, 2021, for the market value of the warrants (including the cash in lieu you received) and the purchase of the warrants.  The cash in lieu you received should help calculate a cost basis for the warrants received.

Geobrick

That should work. So if/when the warrants expire without exercising them, how is the remaining loss of from the warrant basis accounted for? A sale of the warrant shares for $0? I'm sure the broker just pulls the shares at that point.

Sherlock

Geobrick said:

That should work. So if/when the warrants expire without exercising them, how is the remaining loss of from the warrant basis accounted for? A sale of the warrant shares for $0? I'm sure the broker just pulls the shares at that point.

Correct.  If the warrants expire without being exercised, enter their sale for $0.