new stock spinoff - w/shares "when issued"

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
ps56k
Posts: 980
Joined: Sat Mar 19, 2011 1:28 pm
Location: Chicago area

new stock spinoff - w/shares "when issued"

Post by ps56k »

I happen to be holding a stock called - Rayonier - http://finance.yahoo.com/q?s=RYN
On Friday 6/27 - they will spinoff part of their company into a new publicly traded ticker.
This new ticker is - RYAM-WI - http://finance.yahoo.com/q?s=RYAM-WI
and has been listed and avail for about a week...

This is the first time I've run across the "when issued" type of stock listing.

Just to see what or how it works,
I put a buy order into Schwab for RYAM-WI - which was "filled",
but of course doesn't show any real shares in my account
or having money deducted from my account,
or having a BUY transaction download to Quicken.

SO - what is the status of my RYAM-WI shares - after my "buy" ?

Kinda looks like a pending transaction, queued for when the shares become avail,
but yet I can't cancel the transaction, or sell the shares I don't have.

--------->> here was a comment from another forum -

I've often heard about them, but as far as I can recall, I've never actually
dealt with When-Issued shares.

My GUESS is that, as with a Short Sale, our broker lends us - on paper - the
shares that are not yet actually available. Then, when the shares are
actually issued, he buys some for us and puts them in our account. We may
never know - or care - how much the broker pays/paid for the shares. We
know only the price we paid for the WI shares. (And I don't know when our
holding period starts: when we buy the WI share, or when the shares are
actually issued, or when the actual shares replace the WI entry in our
account.) But, as I (sort of) understand it, you CAN sell your WI shares
before the actual issue date; your broker will handle the details in your
account.

Guess will just have to wait for Friday and see how it shakes out.
Tanelorn
Posts: 2370
Joined: Thu May 01, 2014 9:35 pm

Re: new stock spinoff - w/shares "when issued"

Post by Tanelorn »

ps56k wrote:I happen to be holding a stock called - Rayonier - http://finance.yahoo.com/q?s=RYN
On Friday 6/27 - they will spinoff part of their company into a new publicly traded ticker.
This new ticker is - RYAM-WI - http://finance.yahoo.com/q?s=RYAM-WI
and has been listed and avail for about a week...

This is the first time I've run across the "when issued" type of stock listing.

Just to see what or how it works,
I put a buy order into Schwab for RYAM-WI - which was "filled",
but of course doesn't show any real shares in my account
or having money deducted from my account,
or having a BUY transaction download to Quicken.

SO - what is the status of my RYAM-WI shares - after my "buy" ?
When issued shares are kind of like a futures contract for something that the company will be distributing in a week. If you own(ed) the parent company on the record date, you get some of the future spin off shares. In the when-issued market, you can sell them in advance if you like the price. Or you can wait until the real shares show up and sell those in the regular market.

If you did buy some RYAM-WI, I would expect you to both have funds deducted and the WI shares post to your account. If you're confused, try calling your broker and asking them to explain it.
User avatar
alec
Posts: 3181
Joined: Fri Mar 02, 2007 1:15 pm

Re: new stock spinoff - w/shares "when issued"

Post by alec »

Two links from NYSE's website:

TAQ 2 User’s Guide
When Issued - means a short form of “when, as, and if issued”; indicates a transaction in a
security authorized for issuance, but not yet issued. All “when issued” transactions are on
an “if” basis, to be settled if and when the actual security is issued.
703.02 (part 1) Stock Split/Stock Rights/Stock Dividend Listing Process
"When Issued" Trading in Distributed Shares—

In the case of a stock distribution which is substantial, both in percentage and in number of shares, the Exchange considers it desirable from the standpoint of public interest to afford shareholders who will receive the distribution the facilities of the Exchange market for their shares at the earliest possible moment.

This is accomplished by trading the "new" shares on a "when issued" basis while continuing the "regular way" market at the predistribution price. These two markets exist concurrently through the mail date. The regular way trading process is more fully explained below. In "when issued" trading, contracts for the purchase and sale of shares are made in the same manner as are regular way contracts for presently issued shares, except that when issued contracts are settled by delivery and payment of the shares on a date chosen by the Exchange, normally after the company's mail or payment date. Ordinarily, the date fixed for settlement of when issued contracts is the fourth business day after mailing of the split shares. When issued trading itself terminates on the mail date. Because of the delayed settlement of contracts, companies should avoid setting a record date for any purpose until seven business days after the mail date and may not set a record date during such seven day period for a cash dividend.

Normally, the Exchange will initiate when issued trading when the percentage of additional stock distributed is 25 % or more of the outstanding. There is no fixed date for the commencement of when issued trading, but the Exchange will usually wait until such time as all corporate and official action requisite to the issuance of shares has been taken. The Exchange will also wait until the company's listing application for the distribution has been authorized. Therefore, the company is urged to file the listing application early, preferably before the record date.
So, your buy transaction will not settle, with the new stock and money changing hands, until the stock has been issued by the company. Sometimes the new stock doesn't actually get issued for a variety of reasons (like shareholders don't approve the spinoff), and the money doesn't change hands.

If you now realize that you don't want the shares of the new company, have you called your broker and tried to sell your "when issued" shares?

Alec
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair
Post Reply