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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (15920)	1/22/2000 10:10:00 PM
From: Mark Peterson CPA	Read Replies (3) \| Respond to of 19700

TimbaBear, you're right to raise the question: and if, some time in the future, CMGI sells ENGA for "X" dollars per share....say, 126/share, would the IRS want this current treatment revisited? At the time of CMGI's subsequent sale of ENGA shares, a taxable transaction (and one recognized for EPS purposes) would result. Thought you might enjoy reviewing the 368(a) reorganization that CMGI used with AdForce, essentially resulting, for the moment, in a non-taxable event. I'm pretty certain they'll use a variant of this for the roll-up... In the opinion of Hale and Dorr LLP, counsel to CMGI, and in the opinion of Fenwick & West LLP, counsel to AdForce, the merger will constitute a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code. Accordingly, subject to the limitations and qualifications referred to herein, the following tax consequences will result: . No gain or loss will be recognized by CMGI, AdForce or the transitory subsidiary solely as a result of the merger. . No gain or loss will be recognized by the holders of AdForce common stock upon the receipt of CMGI common stock solely in exchange for such AdForce common stock in the merger, except to the extent of cash received in lieu of fractional shares. . Cash payments received by holders of AdForce common stock in lieu of a fractional share will be treated as capital gain (or loss) measured by the difference between the cash payment received and the portion of the tax basis in the shares of AdForce common stock surrendered that is allocable to such fractional share. Such gain (or loss) will be long-term capital gain (or loss) if such fractional share of CMGI common stock has been held for more than one year at the effective time of the merger. . The aggregate tax basis of the CMGI common stock so received by AdForce stockholders in the merger, including any fractional share of CMGI common stock not actually received, will be the same as the aggregate tax basis of the AdForce common stock surrendered in exchange. . The holding period of the CMGI common stock received by each AdForce stockholder in the merger will include the holding period for the AdForce common stock surrendered in exchange, provided that the AdForce common stock surrendered is held as a capital asset at the effective time of the merger. A successful Internal Revenue Service challenge to the "reorganization" status of the merger would result in an AdForce stockholder recognizing gain or loss with respect to each share of AdForce common stock surrendered in the merger equal to the difference between the AdForce stockholder's basis in such share and the fair market value, as of the effective time of the merger, of the CMGI common stock received in exchange. In such event, an AdForce stockholder's aggregate tax basis in the CMGI common stock received would equal its fair market value, and the AdForce stockholder's holding period for such stock would begin the day after the merger. And as long as stock prices continue to hold their values in the marketplace, CMGI has certainly built a foundation that will produce greater amounts of earnings on the sale of its ownership interest in ENGA. More than would have been produced without the roll-up. Mark