JNJ split-off to KVUE

steelyman

steelyman

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I nibbled on Kenvue last week.
 
Not sure what I'm going to do yet ?
Other than being a dividend aristocrat, JNJ shares certainly haven't set the world on fire lately. Of course all the lawsuits haven't helped. On the other hand, shares have rallied since July 19.

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It's probably a bad comparison, but when I think of the last 2 spinoffs I was involved in, my gut says no.

Eli Lilly split-off Elanco animal health 4 or 5 years ago. I chose not to participate.
https://www.early-retirement.org/forums/f44/eli-lilly-elanco-exchange-offer-96346.html

Thank God for that. Lilly shares have skyrocketed, while Elanco shares have cratered.
Would've felt awful about that.
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The other was the Realty Income (O) spin-off of Orion Office REIT (ONL) late in 2021. That one has cratered as well.

I'll most likely keep my J&J shares, & monitor Kenvue. I think the IPO was priced at $22 sometime in May. Currently trading at $24.69
 
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These deals are so complicated, I feel like the only one at the table who doesn't know who the patsy is.
 
I'm very interested in this thread. Back in the day I worked for JNJ in sales over 30 years ago and have held onto all my stock. Bought some more shares through 2010 and have been reinvesting dividends from day one in their DRIP. I've been considering lately to start to take the dividends and stop reinvesting. Our plan was to leave the stock to the kids as an inheritance as we are fortunate enough to not need the proceeds to cover our current expenses. It also does not throw our asset allocation out of whack and is the only individual stock I own. So as a long term holder I'm leaning towards staying with JNJ but do not have nearly enough information to make an informed decision yet. Love the comment of feeling like the only one at the table who doesn't know who the patsy is!
 
tennisno1 said:
I'm very interested in this thread. Back in the day I worked for JNJ in sales over 30 years ago and have held onto all my stock. Bought some more shares through 2010 and have been reinvesting dividends from day one in their DRIP. I've been considering lately to start to take the dividends and stop reinvesting. Our plan was to leave the stock to the kids as an inheritance as we are fortunate enough to not need the proceeds to cover our current expenses. It also does not throw our asset allocation out of whack and is the only individual stock I own. So as a long term holder I'm leaning towards staying with JNJ but do not have nearly enough information to make an informed decision yet. Love the comment of feeling like the only one at the table who doesn't know who the patsy is!
Click to expand...

Yep. In this case though, I figure that is me.
 
Does anyone know if the split off of KVUE shares constitutes a taxable event? I have a fair amount of long term capital gains in JNJ and didn't plan to realize them this year.
 
^ I don't know in this particular case, but most of the time they are not taxable events. With the minor exception if you end up with cash in lieu of a fractional share, but that would be very small.

If you do take the spinoff shares, note that your original JNJ basis will probably be split according to some formula provided in the spinoff documentation between the JNJ and KVUE shares. You'll need that info when you go to sell either JNJ or KVUE shares in the future. If you're relying on your broker to track basis, it might be worth checking after the split to make sure the basis numbers look reasonably right.

My Dad owns some JNJ and I'm doubtful which is better so I'm taking the null decision and doing nothing. I did read an article saying that the legal liability for the baby powder talc in the US stays with JNJ; foreign liability goes with KVUE but the latter liability is much smaller.
 
If the parent company doesn’t want to hold the KVUE shares, why would I? Every other instance of a spin-out I have been involved with has been a non-taxable event whereby the value of the two stocks after the split is approximately equal to the original stock pre-split, but the action is supposed to somehow unlock value. This one is odd. My cost on JNJ is ~$80/sh but its all deferred.
 
KVUE shares offered at a 7% discount to JNJ shareholders. I nibbled - converted 10% of my shares to KVUE.
 
I have not looked at this but it seems that you have to make a choice on which shares you want...


I am a bit surprised they just do not split the company and give everybody their share of both companies... it has been done before..
 
Texas Proud said:
...


I am a bit surprised they just do not split the company and give everybody their share of both companies... it has been done before..
Click to expand...


I agree. Curiously, if the offer is under/subscribed they will issue the un/exvhanged shares of KVUE as a dividend.
My understanding is that you have to opt-in to exchange a portion of your JNJ shares for the new stock KVUE. Too complicated. I’ll sit on my hands.
 
jazz4cash said:
I agree. Curiously, if the offer is under/subscribed they will issue the un/exvhanged shares of KVUE as a dividend.
My understanding is that you have to opt-in to exchange a portion of your JNJ shares for the new stock KVUE. Too complicated. I’ll sit on my hands.
Click to expand...

At that point they'll probably just sell the shares on the open market.
 
jazz4cash said:
I agree. Curiously, if the offer is under/subscribed they will issue the un/exvhanged shares of KVUE as a dividend.
My understanding is that you have to opt-in to exchange a portion of your JNJ shares for the new stock KVUE. Too complicated. I’ll sit on my hands.
Click to expand...
I looked at the JNJ notice on my brokers website, to see some details of the offer. When I saw it was 350+ pages, I dropped. Keeping my JNJ shares.
 
SecondCor521 said:
At that point they'll probably just sell the shares on the open market.
Click to expand...



No, the Exchange offer says…

“If the Exchange Offer is consummated but less than all shares of Kenvue Common Stock offered by Johnson & Johnson in the Exchange Offer are exchanged because the Exchange Offer is not fully subscribed, Johnson & Johnson intends to make a tax-free distribution to its shareholders of the shares of Kenvue Common Stock that were offered but not exchanged in the Exchange Offer”
 
jazz4cash said:
No, the Exchange offer says…

“If the Exchange Offer is consummated but less than all shares of Kenvue Common Stock offered by Johnson & Johnson in the Exchange Offer are exchanged because the Exchange Offer is not fully subscribed, Johnson & Johnson intends to make a tax-free distribution to its shareholders of the shares of Kenvue Common Stock that were offered but not exchanged in the Exchange Offer”
Click to expand...

Oh. Thanks for the correction. Blech to that, but what can you do? (Sell Kenvue shares thus received, I suppose. Still blech.)
 
I tendered all my JNJ for KVUE.
Got lots of other Healthcare stock, not that much Consumer.
KVUE is not in S&P index, but may get added.
Discount for tendering.
Most retail investors won’t tender - contrarian play.
 
gcgang said:
I tendered all my JNJ for KVUE.

Got lots of other Healthcare stock, not that much Consumer.

KVUE is not in S&P index, but may get added.

Discount for tendering.

Most retail investors won’t tender - contrarian play.
Click to expand...



It will get added (WOW!). From the tiny bit I have digested, I would at least wait until the date when the exchange ratio is close to being set. If it looks like the target ratio won’t hold up at least it’s not a surprise.

I wonder who gets knocked out of the S&P?
 
Is there a way that exchanging JNJ for KVUE could result in a tax savings? (I have a large LTCG with my JNJ shares.)
 
youbet said:
Is there a way that exchanging JNJ for KVUE could result in a tax savings? (I have a large LTCG with my JNJ shares.)
Click to expand...

Doubtful. Usually what happens in these scenarios is that your total JNJ basis would get split on some ratio between your old JNJ shares and your new KVUE shares.

I would guess that your KVUE shares would inherit your holding period, but I don't actually know for sure.

So you'll still have the same basis, unrealized LTCG, and (I think) holding period. It'll just be spread across two different companies.
 
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