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#1 Posted : Monday, July 13, 2020 3:31:23 AM(UTC)

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If you own T-Mobile (TMUS) you saw a new security appear in your recent broker statement, TMUSR. You should have received 1 TMUSR for each share of TMUS owned. This security is a rights offering. It gives you the option to redeem each right for .05 shares of TMUS at a price of $103 per full share. It is my understanding you cannot purchase fractional shares of TMUS when redeeming your rights. The rights do trade independently. The rights expire July 27 at 5 pm Eastern.
At the close of business Friday, July 10, the rights were priced at .2162. If we assume you owned 100 TMUS shares, you received 100 TMUSR. Selling your rights would give you a gain of 21.62. If you redeemed your rights and sold the new TMUS shares immediately you would gain 20.25 at the 107.05 closing price on Friday for TMUS. One hundred rights would allow the purchase of 5 shares of TMUS at 103. The gain is then (107.05 – 103) *5.
At the current prices it is slightly better to sell the rights unless you believe the TMUS shares are a good buy at 103 for holding for a longer period. To account for the rights acquisition, if you are selling them, a spinoff of the TMUSR shares from TMUS would probably be best. Use the option of choosing a Remaining Basis percentage and enter 100. The rights will have a cost basis of zero and your TMUS shares will keep their pre-spinoff basis. You only need to do this if you sell the rights. If you let them expire you will need to do nothing to account for them. If you exercise the rights, you will account for the new TMUS shares with a Buy transaction at the 103 per share price offered by the rights.

Russell Malley

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