TheCap
Created: Jun 24, 2020
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SPAC Central 3 years ago

SPAC Unit Split - My experience with Fidelity

In September of 2020 I purchased some TWNDU Units for $10.01 a few days after IPO and before any warrants or shares had separated for trading. I picked a pre-separation SPAC Unit and set out to go through the SPAC Unit separation process at Fidelity. This process is my first test of the Unit separation process and specifically the Fidelity process. Note: these Units were purchased in my HSA account and not my cash brokerage account since I trade my short-term plays in my HSA account to minimize the tax impacts of short-term moves.

Couple of things I wanted to learn and confirm:

1.      Confirm if Fidelity charges any fees for the separation,
2.      See how their process is setup and how much effort it takes to process this Corporate Action,
3.      See what the resulting basis allocation would be for the separated Units and Warrants,
a.      Tax basis considerations for yearend g/l reporting.
b.      Is there a holding period difference between separated Shares and Units?

The process: So a few months after the Warrants and Shares separated for trading I called the number on my Corporate Actions page (800-544-8666) to complete the process of separating my Units since I had already received the alert in my account from Fidelity. My rep tried to complete the process but when he went to submit he had a restriction on his side since the Units are in my HSA account that is apparently handled by a different group inside Fidelity. I was transferred to the HSA group rep who transferred me to another person. I told him what I was doing, and he confirmed my number for callback. First call total time 44 minutes including the initial wait which felt like the longest part. I Should mention that once I spoke to my first rep, there was very little to no hold time between associates. While waiting for a callback, I noticed the TWND Units in my account changed to their "numbers" and became unavailable for trading. The rep said that the Shares and Warrants were re-elected and should be available by Friday or Monday at the latest (3-5 days).

After 1 week, 1 hour of call time and 1 hour of waiting between calls, the separated Shares and Warrants are in my account and available for trading the following Tuesday.

The results: 

1.      There were no fees to separate the Units.
2.      Process was somewhat painful from a timing and call perspective, but this may be primarily due to the use of my HSA account.
3.      My cost basis shows:
a.      Shares: $9.37
b.      Warrants: $1.28
c.      These amounts seem to be the relative market values on the day of split. 
4.      Both Shares & Warrants kept the original purchase date.

Important Note: be aware of the Share to Warrant ratio unique to each SPAC Unit and only buy in multiples that offer full Warrants upon separation unless you want to hold some Units after completion of the separation. The TWNDU contain 1 share and ½ warrant so I bought them in a round lot.

I will likely employ this approach for some Units in the future and will provide some updates as I go along. My next attempt will be to see if the process is identical for Units bought after they have already started separate trading of the Shares and Units.

TL;DR – Fidelity lets you split Units between Shares and Warrants for no cost if you call to complete your Corporate Action. This was done with a non-separated Unit bought pre-separation of Shares and Warrants. The holding period was the original Unit purchase date and the resulting cost basis is the relative market prices at separation.

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