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How to enter Exxon XOM purchase of Pioneer Natural Resources PXD in Quicken

sjmsing

What price per share for acquiring company do I use?

I am using the Corporate Acquisition option and have the New Shares issued 2.3234 per held share but not sure which price per share to use. Is it the closing price on the day the acquisition closed, the day it was announced? Your guidance is appreciated.

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q_lurker

you’d use the closing price of XOM = 116.00 on 5/3/24.

ebk33

I used $116.24 I don't think it matters on a straight stock-for-stock deal…

q_lurker

I agree, I don’t think it really matters. My $116 value came from a quick look at my Stocks app. I believe any quotes or brokerage download may override the entry you make on the form.

q_lurker

Upon further review: The price does make a difference.

For the record, XOM closed at 116.24 on Thursday 5/2 and 116.00 on Friday 5/3. One can argue to use either date I suppose, but one needs to be consistent.

My go-to check on these types of events is the Investment Performance Report. For this stock-for-stock acquisition, the report will list the Remove Shares as a "Return" and the Add Shares as an "Investment". The two parts should balance each other such that the transaction itself does not generate 'performance'.

What the report sees (computes) as the Remove Shares 'Return' is Number of (removed) shares x Share ratio x price per share.

That would be 100 Shares of PXD x 2.3234 x either 116.24 or 116.00 depending on which value is chosen.

What the report uses (computes) for the Add Shares 'Investment' is Number of (added) shares x closing price per share.

That would be 232.34 Shares of XOM x 116.24 (if the transaction was dated Thursday) or 116.00 (if the transaction was dated Friday).

So if one dated the transaction Thursday 5/2/24, one should use the 116.24 closing of XOM on Thursday. If one dated the transaction Friday 5/3/24, the correct value to insert on the form is the 116.00 closing of XM on Friday.

Real world — no big difference, but there is still a right way and a wrong way.

sjmsing

@q_lurker Thanks for the detailed explanation! Very helpful.

The XOM press release is dated May 03, 2024 7:43 AM CDT. This is before the market opened on 5/3 and says the acquisition was closed at this point so I will use the date 5/2/24 and closing price that day of 116.24.

https://investor.exxonmobil.com/news-events/press-releases/detail/1163/exxonmobil-completes-acquisition-of-pioneer-natural

Thanks!

q_lurker

The counter-question to that is: At the close of business on Thursday, did you have 100 shares of PXD or 232.34 shares of XOM?

My brokerage shows the exchange on the Friday with the PXD held on Thursday.

Either way works - provided you are consistent.

mtn_living

Over the years I have come to the conclusion it is best to wait for the acquiring company to issue form 8937 which has the exact share pricing to use in the acquisition transaction. It usually comes out within, I think, a week or so of the completion of the transaction. I just let things sit until then. So in this case, I will wait for Exxon to issue form 8937 for the Pioneer acquisition.

sjmsing

FYI - I realized that the fractional shares of XOM were not credited to my accounts. I contacted Schwab and was told the purchase is providing cash in lieu of the fractional shares. I am waiting on a response on when I will see the cash in my account.

I plan to enter a sell transaction in Quicken to account for the cash in lieu of fractional shares since the Quicken Corporate Acquisition transaction does not account for this. I'll wait until I see the cash to determine the price for the sell transaction.

q_lurker

@sjmsing I usually see the cash-in-lieu credit about 3 days after the deal.

Your plan to “sell” the fractional shares for that CIL amount is correct. The only gotcha can be if multiple lots are involved, in which case how is the brokerage accounting for the specific lot(s) sold.

mtn_living

Well….I was wrong about Form 8937. Usually companies spell out exactly the relevant share prices on that form but Exxon doesn't.

q_lurker

@mtn_living There is really nothing relevant in an 8937 for this type of transaction. 100% of the basis of one's PXD shares became the basis of 2.3234 times as many shares of XOM. No share values are needed. (A corporate spinoff is much different.)

As I noted, it can be technically important within Quicken to use the 'right' closing value of XOM for the date the user chooses for the transaction, but that has no impact on capital gain (tax) computations. Quicken moves 100% of the basis from the PXD to the XOM shares.

For anyone particularly interested the form can (currently) be found here:

https://investor.exxonmobil.com/resources/transaction-form-8937