WALL STREET

The new DXC hits 'The Street'

Stock seesaws in first two trading days

DXC Technology started trading on the New York Stock Exchange Monday at $69.20 per share upon the completion of the merger of the now-former Computer Sciences Corp. into the enterprise services segment of Hewlett Packard Enterprise.

Shares in Tysons, Va.-based global IT services company DXC fell 1.5 percent Monday but climbed back 2.1 percent Tuesday to $69.40 in volatile trading that is customary for new companies just starting to trade their shares on public markets.

Investors exchanged almost 35 million shares in DXC Monday. DXC carries a total market capitalization of nearly $9.9 billion with almost 141.8 million floating shares, according to CNBC market data.

Floating shares are those issued to public investors and do not include stock held by company officers or other insiders.

DXC also replaced Southwestern Energy on the U.S. stock bellwether S&P 500 composite index Monday. HPE keeps its position on the S&P 500.

HPE stockholders own 50.1 percent of the shares in DXC and CSC stockholders have 49.9 percent under the tax-free “Reverse Morris Trust” transaction to create the new company.

For a deal to qualify as a Reverse Morris Trust, a seller spins off a business it wants to sell into a separate new company that subsequently combines with a buyer. The buyer then issues shares in the combined company to stockholders in the selling company.

The selling company’s stockholders must then own more than half of the voting rights and equity in the combined company to fulfill another requirement for RMT deals, which help a selling company avoid taxes on the deal’s income.

Lockheed Martin used that tax-free RMT structure to spin off its former IS&GS segment, which subsequently merged into Leidos. Lockheed stockholders own 50.5 percent of the shares in the larger Leidos entity and the latter’s stockholders have 49.5 percent.

The former CSC stock closed Friday at $69.02 to register a 93-percent increase from the deal’s original announcement on May 24, 2016. Shares in HPE ended Friday at $23.70 to record a 46-percent jump in that time.

HPE’s stock took a 26-percent hit Monday after the company lowered full-year profit guidance but was up 1-percent in mid-afternoon trading Tuesday. Monday’s volume totaled almost 32 million shares, three times above the three-month average.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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