Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: johnd who wrote (28712)	8/25/1999 7:02:00 PM
From: Teflon	Read Replies (1) \| Respond to of 74651

jd, there are numerous ways in which the organization could set this up. There is no "one way" that it would occur. A common arrangement would involve MSFT contributing the Assets of the Interactive Group into the new business vehicle(probably a newly formed 100% owned subsidiary), getting 100% of the equity in return for such consideration. (Let's assume the new venture was to be called "MSN" for the purposes of this post) Then MSFT would offer the employees that were to follow MSN the option to stay with MSFT or leave and go with the new venture. Those that chose to stay would be relocated to the newly opened Greenland Office, and those that chose to go with the MSN would probably be given the option to swap their outstanding options in MSFT for a "similar in value" options package in MSN. More than likely these shares would share the vesting characteristics of the former MSFT options forfeited, but with some tweeks depending on the individual. There are other scenarios which could be presented, this is just one option. Once the group was established that was to take MSN to market, MSFT would go through the rigors of setting up MSN as a separate operating entity, then go through the process of filing the Registration Statement for an IPO. Depending on the number of shares and percentage ownership that MSFT retains (as compared to shares set aside for employees, sold to other investors privately, and ultimately sold to the public through the IPO) MSFT may or may not have to consolidate MSN into its Financial Statements for financial reporting purposes. Usually, if MSFT owns less than 80%, they could structure the relationship so that they wouldn't have to consolidate -- this is usually dictated by the level of direct control that MSFT is able to exert over MSN. The more control Gates and MSFT has, the lower the acceptable level of ownership MSFT is allowed to retain without having to consolidate. My gut feel is that they'd come in somewhere around 65%-75% by the end of the IPO. Once the MSN IPO goes public, MSFT would have the option of (1) holding onto the shares of MSN where in that case we as shareholders derive value from the rise in MSN's share price indirectly through the unrealized gains sitting on MSFT's balance sheet, or (2) MSFT declares a dividend and distributes shares of MSN directly to its shareholders based on some percentage allocation in which case we realize the appreciation in MSN directly. I hope this was helpful :) Teflon

To: johnd who wrote (28712)	8/25/1999 7:05:00 PM
From: djia101362	Respond to of 74651

johnd, in a spin-off each msft shareholder would receive a proportionate share of the the new company, let's call it msnet.com. for discussion purposes let's say the net properties are worth $50B or approxmately 1/10 of msft market cap. each msft shareholder could expect to get about 1 share of msnet.com for every 10 shares of msft they own. your cost basis in the msnet.com would be 1/10 of your orginal msft cost basis and the remaining 90% would be your cost basis in your msft shares. on the day the spin-off begins trading, msft shares would probably drop by the value of the spin-off, kind of like a company does after it goes ex-dividend. but from that day on, msnet.com would be free to trade on it's own and fly w/ the riduculous P/E companies like AOL, YHOO, and the likes. the spin-off is a tax-free transaction and you would only trigger a taxable event by selling the msnet.com shares. your holding period tacks-on meaning the date of purchase for your msnet.com shares would be the day you bought your msft shares and not the date the spin-off took effect. hope this helps but remember, you should always check w/ your tax advisor if you have any questions.