Joe, good question many people have a hard time understanding how they can profit off a spin off.
First off you need to understand that you the shareholder are an owner in the company. That company in turns owns assets and subsidiaries, all of which have a hard value. With Ftel owning 79% of FNET, you in turn own your respective proportion of FNET also. If FTEL sells FNET off, then the proceeds come back into the companies treasury, and therefore you have stock that has a cash value ( hard asset). But depending on the percentage of shares that are spun out into the IPO, some may be retained by the company, thus reflecting their share value in the price of the parent stock, or it can be dibursed to you in the form of a dividend. Either way, you will recieve the percieved value.
Where there is a differnece is in tax liabilities. If the shares are disbursed to you, then you have to declare them as income, if they are retained by the company you won't realize the gain till you sell the stock at a higher price that reflects it's value.
Either way, an IPO of $10 or higher is a problem I can learn to live with.
Hope this answers your question.
RB |
