I bought 400 shares of IPOB.U at $11.84/unit. Each unit can be split into 1 share + 1/3 warrant when the holder desires (after the stock and warrants start trading freely, but not before.)
I called my broker a few months later to split the units into stock (IPOB) and warrants (IPOB.WS) and I ended up with 400 shares and 133 warrants. However the broker (e-Trade) set the cost basis for these new shares post reorganization to $0, and left it up to me to calculate the appropriate basis.
Here are my questions:
- Since both the stock and warrant were trading freely on the day I purchased the units, I assume that my basis is whatever they were at closing — $10.85 and $2.84, respectively. Is this correct?
- Does my clock for long-term cap gains start on the day I purchased the units (August) or when I split them (October)?
- What would one do in the case where the stock and warrants aren't trading freely? How would one calculate the original basis of these post-split instruments?