Yesterday the ConocoPhillips spinoff into two companies went through. Phillips 66 (PSX) was spunoff from the parent company of Conoco (COP) to create value for shareholders. Phillips 66 is now comprised of the refining and pipeline business while Conoco is now the largest pure exploration and production company. Shareholders received 1 share of PSX for every 2 shares of COP.
Let's go through the calculations to figure out your new cost basis.
Original Shares of COP - 21
Original Cost for COP shares - $1,386.88
Next we wait need the closing price from the 1st trading day, May 1st in this situation.
COP - $56.51
PSX - $32.76
Now you need to know the split ratio. For every 2 shares of COP you received 1 share of PSX.
Shares of new companies are easy enough to calculate. You retain the original amount of shares in COP and the new shares in PSX are multiplied by the spinoff ratio.
New Shares of COP = Original Shares of COP = 21
New Shares of PSX = Original Shares of COP * Split Ratio = 21 * 1/2 = 10.5
To calculate the % of your cost basis that relates to the 2 companies you calculate as follows:
COP % = COP Close / (COP Close + PSX Close / 2) = $56.51 / ($56.xx + $32.76 / 2) = 77.53%
PSX % = (PSX Close / 2) / (COP Close + PSX Close / 2) = $32.76 / ($56.51 + $32.76 / 2) = 22.47%
So the proportion of the original cost basis for each company is then:
Cost Basis COP = COP % * Original Cost = 77.53% * $1,386.88 = $1,075.22
Cost Basis PSX = PSX % * Original Cost = 23.xx% * $1,386.88 = $311.66
Your cost basis per share is now easy to calculate as follows:
Cost Basis per Share COP = Cost Basis COP / New Shares of COP = $1,075.22 / 21 = $51.20
Cost Basis per Share PSX = Cost Basis PSX / New Shares of PSX = $311.66 / 10.5 = $29.68
Fractional shares will not be issued in this situation. Meaning that we calculated we should receive 10.5 shares in PSX but when you check your brokerage account it will only show 10 shares. Don't fret because you will receive cash in lieu of fractional shares. In other words, you will receive the cash value of the fractional share portion of your PSX stock. In this case that would be the cash value of 0.5 shares.
Your final numbers would look like this.
21 Shares of COP with a total cost basis of $1,075.22 or a cost basis per share of $51.20.
10 Shares of PSX with a total cost basis of $311.66 or a cost basis per share of $29.68.
Cash in lieu of fractional shares of 0.5 shares * Close of PSX = $16.38.
I hope this helps you out because I had forgotten about the spinoff happening yesterday so it was a nice surprise when I checked my brokerage account. When I tried looking online for how to calculate the cost basis all I could find was how to calculate it based off a 1:1 spinoff which doesn't help in this situation. I calculated it that way and it was giving a cost basis per share of PSX around $50.00 which was definitely not right because you would be starting off with a $20 / share loss.
My final numbers play out like this.
Shares of COP = 16.296
Shares of PSX = 8
Total Cost Basis COP = $834.37
Total Cost Basis of PSX = $241.85
Cost Basis per share COP = $51.20
Cost Basis per share PSX = $29.68
Cash in lieu of fractional shares = $4.85
Also, your cash in lieu of fractional shares can actually be reported as a capital gain instead of being taxed as ordinary income. In my situation it doesn't matter because I originally purchased the shares of COP less than a year ago. But for anyone with a long term capital gain situation that could save you some money albeit not that much since at most your looking at the capital gains based off of 0.999 shares.