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Spin-off Calculations Liberty Media (L) Sample

Spin-off Calculations Liberty Media (L) Sample. OMEGA Investment Club. What Stocks?. Liberty Media spun off series Liberty International This example covers the A series stock Symbols Liberty Media: L Liberty International: LYBTA Referred to as “Original” and “New” stocks.

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Spin-off Calculations Liberty Media (L) Sample

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  1. Spin-off CalculationsLiberty Media (L) Sample OMEGA Investment Club

  2. What Stocks? • Liberty Media spun off series Liberty International • This example covers the A series stock • Symbols • Liberty Media: L • Liberty International: LYBTA • Referred to as “Original” and “New” stocks

  3. Liberty’s News Statement ENGLEWOOD, Colo., June 7 /PRNewswire-FirstCall/ -- Liberty Media Corporation (NYSE: L, LMCB) today announced that it has successfully completed the spin off of Liberty Media International, Inc. (LMI) through the distribution of all of the outstanding shares of LMI common stock to LMC stockholders of record on June 7, 2004. Liberty Media no longer has any ownership interest in LMI and LMI will begin trading regular way tomorrow, June 8, as an independent publicly-traded company on the NASDAQ National Market under the symbols LBTYA and LBTYB. In the spin off, each share of Liberty Media Corporation Series A and Series B common stock received 0.05 shares of the new Liberty Media International, Inc. Series A and Series B common stock, respectively. As previously announced by LMI on June 4, 2004, LMI has filed a registration statement with the Securities and Exchange Commission for a distribution it plans to make to its shareholders of transferable subscription rights to purchase shares of Series A and Series B common stock of LMI. The record date, subscription ratio and subscription price for the rights offering have not yet been determined.

  4. Two Things You Need to Knowto Determine Value of New Stock • How Many Shares • Cost Basis

  5. Process • Remove value of new stock from original stock • Determine value of new stock itself

  6. Cost Basis Obtained from stock’s web site: • 83.63764% L • 16.3624% LBTYA This is given by the company but how is it derived?

  7. x = x = June 8, 2004 Trading Activity Hi Low Average L Series A 9.65 9.25 9.450 LBTYA Series A 38.00 35.95 36.975 Basis Allocation (Given)

  8. Original Purchases of L Total 120.0

  9. Step 1– Adjust Cost of Original Stock The cost basis of each L share you bought for $15.73 now becomes $13.16 ($15.73 x 83.63764%) Purchase Price * Cost Basis = New Price $15.73 * 83.63764 = New Price Don’t forget to convert cost basis from percent to decimal $15.73 * 0.8363764 = $13.16

  10. Step 2 – Adjust Other Original Values • Use same cost basis to determine other values just like we did for purchase Price. For example, Cash Invested * Cost Basis = New Cash Invested • The number of shares do not change!!

  11. Process Update Remove value of new stock from original stock • Determine values of new stock itself

  12. Step 3 – Determine the Number of Shares of the New Stock • This will be seen in your brokerage statement but can also be derived. • Remember… For each share of L you receive 0.05 shares of the new LBTYA Original Shares * Share Basis = Shares of New Stock 120 * 0.05 = 6

  13. Here’s What we know Total # of Shares 6.0

  14. Step 4 – Use Cost Basis to Complete Table • Use 16.3624% LBTYA as the factor to determine values • ***Just like Step 2 *** • Another way would also be to subtract the difference

  15. Why Not Complete the Rest? • Number of Shares • Taking 16.3624% of 120 shares = 19.6 shares • We have already said we have 6 shares of new stock • Share Value - You need the cost basis to calculate the share price but keep in mind it’s only for 0.05 shares… See next slide

  16. Step 5 – Determine Cost of Shares • For 18 Jul 01, the basis in your 0.05 share of Lib is $2.57 ($15.73 x 16.3624%). • So the value in one whole share of Lib Intl becomes $51.40 ($2.57 / 0.05 share). $2.57 X 0.05 sh 1 sh =

  17. Purchase Prices Added

  18. Step 6 – Determine New Shares x = x = x = 120.0 6.0

  19. Completed LBTYA Values $255.86 6.0

  20. Process Update Remove value of new stock from original stock Determine values of new stock itself Finished

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