Stock Deal: DXC Tech. ($400-600 per Person)

[Recyclersteve]

Several of you may remember a posting I made on October 24th titled "Stock Opportunity- ~$300 Profit Or More Per Person." That was about an odd lot tender offer whereby you could buy 99 shares of CBS (Ticker: CBS) stock and tell your broker that you wanted them exchanged for shares of Entercom (Ticker: ETM). This was being done because CBS was selling their radio station business to Entercom using what is called a Reverse Morris Trust transaction. The estimated profit set by CBS was 8%. The profit targets are usually very conservative-- I ended up netting 13.2% after commissions and reorg fees and there were people on this site who made even more than that.

Well, guess what? There is another one of these transactions coming up and I wanted to give everyone a very early heads up so they can plan ahead (learn about how these deals work, think through any questions you might have, decide if you need to sell another stock to free up the cash you will need, etc.).

The name of the company is DXC Technology (Ticker: DXC). You likely don't know the name DXC, but when I explain who they are, you might know of them. DXC is a combination of two companies. They are the former Computer Sciences Corp. (formerly traded under the symbol- CSC- this was a company started by former billionaire presidential candidate H. Ross Perot many years ago) combined with a part of Hewlett Packard.

The gist of the deal is that you will be buying DXC stock and it will be exchanged for stock in a company to be determined.

The more expensive the stock that you buy, the more money you can make on these deals because the incentive is often a percentage of what you are buying. That said, CBS was about a $57 stock when I bought it. DXC is currently a $95 stock. That, in and of itself, has got me pretty excited.

Regarding the timeframe, this deal is expected to close by the end of 1Q18 (3/31/18), so I would expect it to be announced either January or February. I would NOT buy the stock right now, because we don't know for certain that they will have the clause whereby those with 99 shares or less have all shares taken. Once I see an incentive clause and see that those with 99 or less are protected, then I will almost certainly buy the stock. 99 for me, my wife and my daughter (297 total).

Can someone find the link I referenced about the CBS/Entercom deal at the start of this message and put it into this thread, so that I don't have to repeat a lot of what happened last time. It takes a long time to type all those details, so having the link to that thread handy for anyone who hasn't done one of these before will be helpful.

I will reiterate- these types of transactions (when they have the 99 share clause) are the closest I've ever seen to a risk free trade in the stock market. They just don't come up all that often, or I'd be a very wealthy man right now.

If anyone who did the CBS/Entercom deal wants to chime in and offer some words of encouragement for those who didn't find out in time or were sitting on the fence, that would be appreciated.

I will plan to update this thread shortly after hearing what I hope is "the good news."

[hobo finds]

viewtopic.php?f=17&t=41456

[johnbrickner]

Thanks for the heads up, RS.

[Recyclersteve]

http://realcent.org/viewtopic.php?f=17&t=41456

Hobo: Thanks for doing that! Can you explain in simple language how you did that, so I know for next time?

[hobo finds]

Right click over topic then select copy link and paste it where you want.

[Recyclersteve]

Thanks and Happy Holidays.

[JadeDragon]

DXC itself is the product of an HP spin-merger Reverse Morris Trust transaction in April 2017. At that time Forbes said "We value DXC at $22.6 billion or $80.00 per share using 9.7x FY17 EBITDA Multiple. We are reiterating ‘Buy’ rating on DXC." https://www.forbes.com/sites/joecornell ... e6bd107058

This seems to be an effort to spinout some assets post merger. The last deal was a good success for those of us holding less than 100 shares. I pocketed my origional investment and left the profit in Entercom shares to ride and collect dividends.

[JadeDragon]

http://www.nasdaq.com/article/is-dxc-te ... 860546/amp Discribes the deal pretty well. It appears to be creating a company with one customer - the US Government. Business has declined 3.5% this year but this deal brings two private companies into the mix for a three way merger.

[Recyclersteve]

Jade: Thanks for the link, but I am still looking for several more key pieces of info:

1) What is the deadline date for the deal?
2) What is the incentive clause (in percentage terms)?
3) Will those with 99 and fewer shares be protected from proration?
4) How many (in total) shares of stock are they looking to exchange?

This likely won't be public info til January or February.

[JadeDragon]

While this is a reverse morris trust deal, I'm not convinced that it includes a tender process or that the details you seek will ever exist. There may be an opportunity to profit if DXC + NewCo trades for more than just DXC but there may not be a nearly locked in profit like the CBS deal. In the CBS deal CBS was looking for volunters to exit CBS in favor of Entercom, shrinking the number of outstanding CBS shares in the process. CBS was willing to pay investors a premium for accepting shares of the radio business they were offloading instead of the mother ship.

In the DXC deal the company is spinning out assets into NewCo for shares, plus two private co's are adding assets for NewCo shares. DXC gets 86% of Newco and Private shareholders the balance. DXC will than distribute the NewCo shares it got out to DXC shareholders prorata. The deal is already valued and structured, pending regulatory approvals. The other sides are not public companies so there is no need for exchanging shares or setting the exchange rate like the Entercom/CBS deal had. With no exchange, there is no premium to capture via the 99 share exception. A DXC shareholder that did nothing would carry on owning essentially the same two businesses (with the USPS business somewhat larger post transaction) but now in two listed companies instead of one.

Here is the original press release. http://www.dxc.technology/newsroom/pres ... cly_traded

[Recyclersteve]

We shall see- fingers crossed for now. Thanks.

[knibloe]

I do not trade in stocks, but would like to. Is there any more information on this opprotunity that makes it worth doing?

[Recyclersteve]

I do not trade in stocks, but would like to. Is there any more information on this opprotunity that makes it worth doing?

The first thing I'd do is open a brokerage account and get it set up if possible to have $10k or more to use for the corporate actions. If you have a spouse and/or kids, an account in each name with something like $10k will make it easier to make even more money.

I don't have any more specifics on the DXC transaction yet, but when it happens things will move pretty quickly.

Do you currently have one or more brokerage accounts open and funded?

[Rodebaugh]

DXC is killing it by the way. Look at their 2 year chart.

[knibloe]

I do not trade in stocks, but would like to. Is there any more information on this opprotunity that makes it worth doing?

The first thing I'd do is open a brokerage account and get it set up if possible to have $10k or more to use for the corporate actions. If you have a spouse and/or kids, an account in each name with something like $10k will make it easier to make even more money.

I don't have any more specifics on the DXC transaction yet, but when it happens things will move pretty quickly.

Do you currently have one or more brokerage accounts open and funded?

I do not have a brokerage account. The only stocks i own are in my 401K and ESOP. I do have a fair amount of cash that I need to do something with. Do any of you have suggestions on brokerage accounts or tips that a newbe like me should know?

[Recyclersteve]

I do not trade in stocks, but would like to. Is there any more information on this opprotunity that makes it worth doing?

I do not have a brokerage account. The only stocks i own are in my 401K and ESOP. I do have a fair amount of cash that I need to do something with. Do any of you have suggestions on brokerage accounts or tips that a newbe like me should know?

You most likely own mutual funds (or perhaps ETF's) (baskets of stocks if you will) in your 401k. The ESOP might include ownership of your company stock, but no other companies. It would be very unusual for either of those accounts to allow ownership of whatever stock you feel like buying. That is just the way they are set up. They want people to avoid taking lots of risk with their nest eggs. I don't totally agree with that, but I don't set the rules.

You would need to open a separate account in addition to the accounts you mentioned above to be able to do the type of trading I am talking about. While it can be done with less than $10k, you won't make nearly as much money (since you aren't investing as much). With under $5k you are at a point where many wouldn't even open the account. And I absolutely DON'T think it would be a good idea to take money out of a retirement account, pay taxes and a possible penalty, and put the money into a taxable account so you can trade.

There are lots of people out there who have basically what you have and don't have the luxury of having a trading account. So don't feel like you are missing out on something that everyone else is doing. Sorry to be the bearer of bad new, but I want to be honest here.

[knibloe]

No intention of taking money out of my retirement account. However, I do have the cash to start a brokerage account, I just havent done so yet. Also, the ESOP is just company stock, which is o.k., I have shares that I bought at $10 that are no worth $alost $140. I also get a 15% discount when i purchase it.

My question is basically are all brokerage accounts made equal? Is there a company that has good customer service, low comissions/fees...

[Recyclersteve]

No intention of taking money out of my retirement account. However, I do have the cash to start a brokerage account, I just havent done so yet. Also, the ESOP is just company stock, which is o.k., I have shares that I bought at $10 that are no worth $alost $140. I also get a 15% discount when i purchase it.

My question is basically are all brokerage accounts made equal? Is there a company that has good customer service, low comissions/fees...

Did you say you paid $10 a share for something now worth $140 a share? What stock was that and how long have you had it?

For choosing a broker, you can go to a site like barrons.com to compare brokers. We all look for different things, so there is no such thing as a broker that is good for everyone (just like there is no stock that is good for everyone). For me, 24 hour customer service every day of the year from a person who speaks fluent English is important as I sometimes call during odd hours. It is frustrating when I get someone from India and we really don't understand each other.

I am assuming that since you are posting on this site, you will be doing your trading online.

Online stock commissions at Schwab (where I am) and Fidelity are $4.95 per trade. You pay when you buy and when you sell. There are others where the commissions are $6-10 per trade each way. A few, like Edward Jones, have VERY EXPENSIVE commissions. I have recently heard of people paying several hundred dollars per trade with them, which is just ridiculous IMHO.

Well known brokerage firms you might want to check out:

E-Trade
Fidelity
Interactive Brokers (probably more for active trader types)
Merrill Edge (part of Merrill Lynch- owned by Bank of America)
Schwab, Charles (I worked there for almost 20 yrs. and have most of my $ with them)
Scottrade
T.D. Ameritrade

Most of these companies are publicly traded. Why is that important? I want to be able to evaluate the financial stability of a company which holds a good chunk of my net worth. I don't want to worry about not being able to reach my brokerage firm because they declared bankruptcy and my money is tied up for a while. If someone gets heavily involved in Bitcoin, makes a big bet and loses big, I could see a potential bankruptcy on the horizon. I have no idea how to handicap where this would happen first.

The brokers that are NOT publicly traded are Fidelity (a huge company, but still I'd like to be able to see their earnings reports) and Scottrade.

To me I want to have a walk-in branch located somewhere near where I live, even though I don't go there that often. Also, you might want to check out the minimums for opening a brokerage account- pretty sure the min. to open an account at Schwab is still $1,000.

Others might want to chime in on what they look for.

Good luck in reaching your decision.

[highroller4321]

I use fidelity and haven’t had any issues, but I also don’t do super “fancy” trading very often. I like their platform and to me they are very informative about what exactly you are doing, before you click confirm.

[knibloe]

No intention of taking money out of my retirement account. However, I do have the cash to start a brokerage account, I just havent done so yet. Also, the ESOP is just company stock, which is o.k., I have shares that I bought at $10 that are no worth $alost $140. I also get a 15% discount when i purchase it.

My question is basically are all brokerage accounts made equal? Is there a company that has good customer service, low comissions/fees...

Did you say you paid $10 a share for something now worth $140 a share? What stock was that and how long have you had it?

For choosing a broker, you can go to a site like barrons.com to compare brokers. We all look for different things, so there is no such thing as a broker that is good for everyone (just like there is no stock that is good for everyone). For me, 24 hour customer service every day of the year from a person who speaks fluent English is important as I sometimes call during odd hours. It is frustrating when I get someone from India and we really don't understand each other.

I am assuming that since you are posting on this site, you will be doing your trading online.

Online stock commissions at Schwab (where I am) and Fidelity are $4.95 per trade. You pay when you buy and when you sell. There are others where the commissions are $6-10 per trade each way. A few, like Edward Jones, have VERY EXPENSIVE commissions. I have recently heard of people paying several hundred dollars per trade with them, which is just ridiculous IMHO.

Well known brokerage firms you might want to check out:

E-Trade
Fidelity
Interactive Brokers (probably more for active trader types)
Merrill Edge (part of Merrill Lynch- owned by Bank of America)
Schwab, Charles (I worked there for almost 20 yrs. and have most of my $ with them)
Scottrade
T.D. Ameritrade

Most of these companies are publicly traded. Why is that important? I want to be able to evaluate the financial stability of a company which holds a good chunk of my net worth. I don't want to worry about not being able to reach my brokerage firm because they declared bankruptcy and my money is tied up for a while. If someone gets heavily involved in Bitcoin, makes a big bet and loses big, I could see a potential bankruptcy on the horizon. I have no idea how to handicap where this would happen first.

The brokers that are NOT publicly traded are Fidelity (a huge company, but still I'd like to be able to see their earnings reports) and Scottrade.

To me I want to have a walk-in branch located somewhere near where I live, even though I don't go there that often. Also, you might want to check out the minimums for opening a brokerage account- pretty sure the min. to open an account at Schwab is still $1,000.

Others might want to chime in on what they look for.

Good luck in reaching your decision.

Thank you so much, this is the kind of info that I was looking for.

[Sanford02]

I did the CBS/Entercom deal, and I was VERY pleased with the result. I will be watching this one, and eagerly waiting for more info. Keep us posted please!