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Abbott Labs (ABT) split into two companies (ABT and ABBV) at the start of the new year. Shareholders of ABT on Dec. 12 received one share of ABBV for each share of ABT they owned on that date. As I understand it, that means if I bought ABT on Dec. 13, when it was trading around $65 (appx. the same as the day before), I would not receive any shares of ABBV. Yet when the stock officially split on the new year, the new ABT started trading more than 30 points down, with the remainder in ABBV.

Is that correct? If so, why would anyone buy ABT stock at that price after the 12th? Did the people who sold ABT between the 12th and the 31st receive shares of ABBV, essentially for free? If not, what did the Dec. 12th deadline actually mean?

Update: A lot of resources, notably Google Finance, only provide adjusted historical data, but Yahoo Finance does still list the actual prices for ABT at the time of the split.

Notably:

| Date         | Close | Volume  |
| Dec 12, 2012 | 66.01 | 19,150k |
| Dec 13, 2012 | 65.32 | 14,318k |
| Dec 31, 2012 | 65.50 | 19,062k |
| Jan 2, 2013  | 32.05 | 20,266k |

As I understand it, anyone buying ABT between the 13th and the 31st did not receive a share of ABBV, yet people were still willingly paying $60+/share for a stock they knew would halve in value come the new year. Why?

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Google Finance shows ABBV starting to trade on December 10, 2012 at $35/share. –  Craig W Jan 30 '13 at 4:27
    
Google and quite a few automatically adjust the historical price to reflect splits / bonus issues ... –  Dheer Jan 30 '13 at 12:06
    
@Dheer Yeah, it made it tricky for me to find the real prices. But they certainly were 60+ up until Dec. 31st, despite the ex-dividend date. The shares listed before the 2nd of Jan. were ABBV-W - the pre-market price-balancing stocks. Can't remember where I read that, if I find it I'll post a citation. –  dimo414 Jan 30 '13 at 18:58
    
@Dheer Google Finance seems to adjust prices for ordinary splits but not for splits into two distinct stocks as evidenced by the steep drop in price of ABT. –  Craig W Jan 30 '13 at 20:50

1 Answer 1

The trades after that date were Ex-DIV, meaning after 5 pm Dec 12, new trades did not include the shares that were to be spun out.

The process is very orderly, no one pays $60 without getting the spinoff, and no one pays $30 but still gets it.

The real question is why there's that long delay nearly three weeks to make the spinoff shares available. I don't know.

By the way, the stock options are adjusted as well. Someone owning a $50 put isn't suddenly in the money on 12/13.

Edit - (I am not a hoarder. I started a fire last night and realized I had a few Barron's in the paper pile) This is how the ABT quote appeared in the 12/24 issue of Barron's. Both the original quote, and the WI (when issued) for the stock less the spin off company.

ABT quote

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That's what confuses me. The stock goes ex-div on the 12th, but people were still paying 60+ for it between the 13th and the 31st. Why? –  dimo414 Jan 30 '13 at 19:00
    
Interesting. I haven't seen any reference to that anywhere, but it would make sense. Is there any standard way to know that is the case? Does that mean when you buy a normal stock between it's ex-div date and the payout date you (could potentially) still get the dividend? –  dimo414 Jan 30 '13 at 21:22
    
Yahoo and Google have their own way to report historical info. A split for example shouldn't look like a 50% price drop, although that's exactly what happens in the 2for 1 split. I don't own or follow ABT so I wasn't watching its ticker. I can only assure you that my answer is not without experience of other stocks' spinoffs. –  JoeTaxpayer Jan 31 '13 at 0:02
    
I understand why the tickers were updated, it makes sense from a reporting perspective, but it's unfortunate from a historical perspective. What you say certainly makes sense, what confuses me primarily is how anyone would know that that would happen. All the language I was able to see made it sound at least like someone buying ABT after the 12th would not get a share of ABBV. –  dimo414 Jan 31 '13 at 22:08
    
Right, if it went ex-Div on the 13th, the 12th was the last day to get the spinoff, and the last day to pay $60+. I would know that's going to happen because that's how even small dividends are distributed, a day that it goes ex-div and I see the dividend deposit a few weeks later. Forgive me, the process is straight forward. –  JoeTaxpayer Jan 31 '13 at 23:37

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