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Basis for AT&T stock and its spinoff?

dstone42
in Other Investing
Is there any way to know what will be the basis for AT&T shares after it spins off WBD in early April?
Will the AT&T shares give up some of their basis to form a basis for the newly acquired WBD shares?

I've read several articles about the details (e.g about .24 shares of the new company for each share of AT&T), but cannot find anything about the basis going forward. Most articles on this subject concentrate on differing opinions of the prospects for the two separate companies.

I have some shares received from my Dad -- they're under water.
I optimistically bought some AT&T shares myself a few years ago (nice dividend, right) -- they are under water.

Apparently I'll still have those same shares after the split. But will their basis be changed (no matter what I paid for them)? And I'll have some new shares of WBD -- what will their basis be (after all, I didn't directly pay anything for them)?

I'm tempted to harvest the tax loss (and avoid the hassle) by selling now. But I'd like a better handle on the post split situation.
But maybe this spinoff will "unleash" the Warner Media business and the new stock will soar! My experience with spinoffs has not been very good. Did anybody else get saddled with the SO spinoff Mirant (loaded up with debt and went bankrupt).

Thanks for any help or insight,
David

Comments

  • msf
    It will be handled in what seems like the logical way. Your total cost basis is prorated based on the values of the stock you get (or keep) in each company.

    Here's the way Barron's puts it:
    AT&T holders are due to receive about 0.24 share of Warner Bros. Discovery for each AT&T share. AT&T shares were trading late Friday at $24.20, down 37 cents and Discovery stock was at $28.71, off 22 cents.

    Here’s how it would work. Holders would need to allocate part of their cost basis to AT&T and the rest to Warner Bros. Discovery based on stock prices at the time of the spinoff.

    Based on current prices, holders probably would allocate about 28% to Warner Bros. Discovery ($6.90 divided by $24.20) and the rest to AT&T.
    The value of the Discovery stock (as of when the article was written) = 0.24 x $28.71 = $6.90

    https://www.barrons.com/articles/taxes-att-spinoff-warnermedia-51644014937
  • dstone42
    Thanks!
  • PRESSmUPPRESSmUP
    Per recent announcement, it looks like T is scheduled for a $0.2775 quarterly dividend, or 4.65% at current pricing. I'm also at a loss in my taxable account, but I'm not selling (yet) since I want the slug of Warner Bros. Discovery for my pain and suffering. T may do better as the more pure play telecom services provider. Either that, or they're first up in the tax loss selling derby. WBD may just be a winner in a few years.
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