Author Topic: Mergers plop unexpected cash in brokerage account.  (Read 440 times)

markbike528CBX

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Mergers plop unexpected cash in brokerage account.
« on: May 28, 2019, 01:52:01 PM »
OSIR  (https://finance.yahoo.com/quote/osir/  Osiris Therapeutics, Inc ) recently had a merger/buyout.
I got stuck with the cash from a "sale" that I didn't want and did not initiate.
Now I have to deal with this instead of ignoring the brokerage account, like a good Mustachian should ;-)

If any of this sounds like a MPP, already recorded in that thread.

I noticed a lot of class action filings on the merger.
What is the purpose of these?
Do they have a realistic chance of success?
According to Yahoo finance, the price of $19/share is far higher than the average price since 2006.
I fail to see the beef in the  lawsuits.

Personally:
 I got to find out where the brokerage hides the cost basis (separate from a form 1099) so I could update my estimated taxes.
My basis is ~ 35% of the sale value, so I made out OK.
I was also wondering if the "mandatory reorg fee " of $38 as an adjustment in Schedule D is allowed.
I think it is, but I'm not sure.

J.Milly

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Re: Mergers plop unexpected cash in brokerage account.
« Reply #1 on: June 07, 2019, 07:18:37 AM »
The purpose of the class actions is basically to try and wring more money out of the company. They believe that the board accepted a price which was too low and 'undervalued' the company. This is generally never the case, the board usually has it in their best interest to get the best possible price. Almost every time there is a merger or a company misses earnings there is a class action set up. You can join it if you want but rarely will anything come from it.

'Reasonable' nominal fees are usually charged to cover the work of deactivating symbols, reallocating units, the actual main work the brokerage has to do. The reason this happens is because the brokerage house has one big pot with all the shares, they then have to divide and prorate cash and securities to the beneficial owners (ie. you). I personally wouldn't argue it, its also probably in your account agreement that they could charge that.

Hope that helps!

reeshau

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Re: Mergers plop unexpected cash in brokerage account.
« Reply #2 on: June 07, 2019, 07:26:16 AM »
Personally:
 I got to find out where the brokerage hides the cost basis (separate from a form 1099) so I could update my estimated taxes.
My basis is ~ 35% of the sale value, so I made out OK.
I was also wondering if the "mandatory reorg fee " of $38 as an adjustment in Schedule D is allowed.
I think it is, but I'm not sure.

Yes, this would count against your profit from the sale, if that is what you are asking.  But, isn't it already deducted from the net proceeds in your statement?  For TD Ameritrade, this is already done for me.  The calculation is simply net proceeds - cost basis.

P.S.  At higher account balances, fees like these are often waived.

markbike528CBX

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Re: Mergers plop unexpected cash in brokerage account.
« Reply #3 on: June 07, 2019, 09:50:39 AM »
Thanks J.Milly and reeshau !

The $38 "mandatory" reorg fee is a separate ETrade line item from the cash received. It is not clear if it is included in the cost basis, as the shares were bought a long time ago, and I haven't looked up the transaction record. In past reorganization fee were $20 for bankruptcy. Since this is a buyout, then I guess the fee is higher.

I understand the class action suit rationale, but how do the lawyers make enough money on average to justify it?  I saw three or four separate class action suits.  I've tried to join once (AIG), but never got squat.  If you had millions of shares the documentation might be worth the effort, but for me, sub-minimum wage.