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ConocoPhillips Message Board

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  • lner2512 lner2512 Mar 2, 2012 1:09 AM Flag

    Marathon oil split vs COP Breakup

    COP + PSX will open at a price about equal to COP's previous close--then it's up to the shareholders. I think many invested in COP to own an oil company, not just an E & P operation. If that's the case, COP stock will hold its value while PSX will drop as shareholders cash out that part. That happened with WMB when they divested WPX, also an E & P operation--WMB has risen since the spin-out while WPX dropped and has not recovered. There are many differences between the two deals, but a lot of similarities.

    PSX may be a real buy shortly after it reaches the market!

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    • No. Since ballpark (exact % has not been announced), 1/3 the value of COP will leave on day of spin off but the number of shares of COP stock will remain the same, the price of COP will drop by roughly 1/3rd.

      Now I agree that the instantaneous initial combined market cap of COP (post spin) and PSX will equal the market cap of COP (pre spin.)

      But for COP the stock price, EV, market cap and similar will all drop. The drop will be about 1/3rd. But all that value (market cap, EV, etc) will show up in PSX.

      Now IF (again IF, IF, IF) the PSX shares were issued at a 1 for 1 ratio, I agree then the sum of the share prices post spin would be very close to the pre spin COP price. But because of the 1 for 2 ratio, the PSC price will be 2x what it would be in that case.

      What is true is that post spin, COP share price + 1/2*PSX share price = COP pre spin close price (approximately)

      The exact drop will be set by the market and will depend on what specific assets and liabilities go to each entity. Personally I expect about a 1/3rd drop in COP price AND I expect PSX to initiate trading close to this reduced COP price.

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