Hi,
I have 2 stocks that will soon merge in a strange way and I don’t know how to manage it on PP.
Italian stock Unipol will launch a OPS on UnipolSAI where they change 3 Unipol stock each 10 Unipolsai. Plus, they will pay a 2.7 euros for each sock that you own and partecipate to this ops.
I possess both stocks. I suppose that the Unipol stocks exchanged during this operation should price up so that i know that my Unipol value reflect that inbound stocks as a buy. UnipolSAI (the one that get delisted) should be a sell?
Would this affect the acquisition cost record for capital gains purposes? In Australia the Unipol acquisition cost would be the cost of the original UnipolSAI shares but a sell/buy would trigger tax payable on any UnipolSAI capital gain and Unipol cost would be date of acquisition (ie OPS date whatever that means).
I understand you have an accounting view of PP but mine is getting useful outputs from the patterns and numbers in PP.
That output was never requested but PP data is available for other purposes (eg tax). Closed trades are normally an adequate start for tax reporting but your answer would break the nexus between the original financial transaction acquiring UnipolSAI and Unipol. My question is really about the best way of maintaining that nexus. Maybe it’s just comments on sell/buy transactions.
The transaction is a proportional exchange of one security for another (let’s ignore the dividend component). You suggested sell/buy which requires a currency amount.
No funds are exchanged so the actual price is zero. Would PP work better assuming a price, say value based on closing price of UnipolSAI? If a non-zero price is used would a notional/suspense/contra [cash] account be useful so real cash accounts can be reconciled?
That is correct. There is no longer a connection because the acquired company no longer exists.
Yes, if you want to document the past connection, the best way to do this is via the comments column.
That is correct.
It may look like this, but it does not represent the process correctly in business terms. (There is no free lunch. )
Yes, that’s why you should post the transaction as a sale transaction and a purchase transaction.
The price is determined by the price of the buying company on the key date and the ratio (in this case 3:10).
You must have a reference account because you cannot map the transaction as a deposit/delivery.
This is not primarily about matching your reference account with real accounts, but about mapping the transaction in such a way that PP can calculate with correct business data.
Good suggestion for a page in the manual about recording mergers in PP!
I’ve done some research, but, still a few questions.
According to Reuters, the merger offer from Unipol Gruppo seems to a buy-out of € 2.7 per share of UnipolSAI OR (not both) an exhange ratio of 3 Unipol-for-10-unipolSAI. @luca.gervasi Is this correct?
The offer is made on February 16. The closing prices on Feb 15 of both companies (Unipol Gruppo and UnipolSAI) were € 5.74 for Unipol Gruppo and € 2.4/share for UnipolSAI. This seems not in line with the 3-for-10 ratio. Am I missing here something?
Hi Laura, Thanks for the link! I completely agree that the manual should focus more on general principles rather than explaining individual cases. I use them more as examples to illustrate the general principles and as a motivational tool.
A nice side effect however is that they really help me understanding what is going on (in PP).
