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Micro Focus (MFGP) US Stock Issues for alumni. (Updated Apr 14, 2024) Question? Email: info@hpalumni.org
If you ever worked for Micro Focus: Additional info for Micro Focus alumni
Summary re sale of Micro Focus to OpenText: If you acquired MFGP through the HPE spinoff, and accounted for it as HPE's outside tax counsel recommended in 2017-- therefore paying tax on a theoretical 2017 capital gain -- your net loss is ±$28.94 per "B" share. (However, for three employee purchase quarters in 2000 and eight quarters between 2007 and 2010, the net loss after the OpenText sale for those lots is somewhat higher -- ranging from $29.65 to $34.82 per "B" share.) Details below.
Basic Info
There have been many events in the complex history of Micro Focus stock:
- 2017. If you owned any HPE stock on Sep 1, 2017: HPE Software was spun out and merged with a UK company, Micro Focus.
- If you received Micro Focus shares between Sep 1, 2017 and Aug 28, 2019 - as part of the Sep 1, 2017 HPE Software spinoff or otherwise. Settlement of shareholder class action lawsuit.
- 2019. US ADR holders received 0.8296 new MFGP "B" shares plus $4.30 cash on May 20, 2019, replacing each original "A" share.
- 2020. The MFGP dividend announced for 2020 was withdrawn at the last minute and not paid: Fidelity reported this correctly. Some brokerages and stock information services did not.
- 2023. If you owned any Micro Focus stock on Jan 31, 2023: Micro Focus was bought for cash by OpenText.
Details of each event below. [There'll be a quiz on Friday.]
However, first, some basic issues...
Cost Basis. Your current cost basis depends on when you acquired stock as companies were merged or spun out. Members have found that plan administrators, transfer agents, and brokerages vary significantly in how (or if) they track gain/loss and cost basis for the many complex HP-related stock events -- and what (if anything) they report to the IRS.
HPAA members have developed data and advice on HP/HPE-related stock -- including spreadsheets to verify your records or estimate cost basis for employee stock purchases. If you haven't already done so, start here: Stock Recovery and Cost Basis
ADSs. US HPE shareholders got stock in Micro Focus in the form of "American Depository Shares" of the UK company. "These securities, issued by U.S. banks and representing a specific number of shares in a foreign company, trade on American stock exchanges like any domestic stock." Investopedia ADS Explanation Micro Focus ADS Explanation
Administrator vs transfer agent. Confusingly, you may see references to Deutsche Bank (DB) and to American Stock Transfer & Trust Company, LLC (AST) -- referring to the same lot of stock. Deutsche Bank is the administrator of the MFGP ADSs. AST is the transfer agent -- the record-keeper. The number for Deutsche Bank ADSs at AST is 1-866-706-8374
To check for lost US ADSs: New York
MFGP stock price charts. Most online stock-price tracking sites don't mention that the stock has been delisted; they simply show the last price of $6.48 continuing. Here are two MFGP charts that appear to be better: companiesmarketcap.com thestreet.com Unclear if sites accurately tracked the 2019 "A" share to "B" share transition.
What is reported to the IRS. Members have found that plan administrators, transfer agents, and brokerages vary significantly in how (or if) they track gain/loss and cost basis for the many complex HP-related stock events -- and what (if anything) they report to the IRS. Issues with major brokers
If you don't have good records -- or didn't get your lot-and-cost information into your broker's system -- you can use our spreadsheets to develop a reasonable estimate of your cost basis for most HP/HPE-related stocks for any span of HP employment through the 11/1/2000 plan changeover. hpalumni.org/StockSpread Be sure to save the documents you used -- plus, for future reference, a copy of the HPE/MFGP/"Seattle Spinco" letter This "Dear Shareholder" letter does not appear to have been actually sent to all shareholders. Members report that HPE's cost-basis tracking recommendations are not reflected in the records at some brokerages, plan administrators, and transfer agents -- and not uniformly followed by others
FWIW, to date no member has indicated -- privately or on the HPAA forums -- that their returns have been questioned by the IRS due to how they reported the many extremely complex HP/HPE-related stock transactions. Save the documents and spreadsheets you used.
2017. If you owned any HPE stock on Sep 1, 2017: HPE Software was spun out and merged with a UK company, Micro Focus.
You received 13.7 American Depository Shares of a UK company, Micro Focus (MFGP; CUSIP 594837304) per 100 HPE shares. Investopedia ADS Explanation Micro Focus ADS Explanation
Whether this was one of HPE's original intentions or not, outside tax counsel advised that the transfer of HPE's US-centric software business to the UK-based Micro Focus would be penalized by the US Government as a "corporate inversion" (a process by which companies move their legal home overseas to reduce their US tax bill) -- and was therefore a "gain" taxable to US shareholders. HPE Micro Focus Spinoff Details
The resulting twelve-page "Dear Shareholder" letter explaining this does not appear to have been actually sent to all shareholders. HPE/MFGP/"Seattle Spinco" letter
In the letter, HPE suggested that you allocate your cost basis for HPE and MFGP shares based on the relative fair market values of the two stocks at the time of the spinoff -- which results in a cost basis for the US ADSs at $29.34/share and a revised cost basis for the HPE shares at $14.22.
Members report that HPE's cost-basis tracking recommendations are not reflected in the records at some brokerages, plan administrators, and transfer agents -- and not uniformly followed by others.
In summary: If you acquired MFGP through the HPE spinoff, and accounted for it as HPE's outside tax counsel recommended in 2017-- therefore paying tax on a theoretical 2017 capital gain -- the cost basis for your MFGP "A" stock would be reset to $29.34/ "A" share, instead of being linked to the previous cost basis of your HPE stock.
Later, on Apr 30, 2019, US ADR holders received
0.8296 new MFGP "B" shares -- replacing each original "A" share.
The cost basis is then
$29.34 / 0.8296 = $35.37 per "B" share. The net loss after the
OpenText sale is then $35.37 - $6.43 = $28.94 per "B" share.
For certain quarters, the net loss after the OpenText sale is somewhat
higher -- ranging from $29.65 to $34.82 per "B" share. This
applies only to MFGP stock derived from these employee stock purchase
lots:
5/1/00, 8/1/00, 11/1/00,
10/3/07, 1/2/08, 4/2/08, 10/7/09, 11/1/09, 1/6/10, 4/7/10, and
5/1/10.
To download the HPAA's employee stock purchase spreadsheet:
https://www.hpalumni.org/StockSpread
Be sure you note this in your own records (and in your broker's records, if your broker tracks cost basis) -- so that you don't pay tax twice on the same theoretical "gain."
Since then, MFGP price has ranged as low as $1.25.
If you received Micro Focus shares between Sep 1, 2017 and Aug 28, 2019 - as part of the Sep 1, 2017 HPE Software spinoff or otherwise. Settlement of shareholder class action lawsuit. Claim deadline was Jun 30, 2023. Members report that payouts have not been made yet. HPAA payout estimate of $0.39 per MFGP "A" share. MFGP Class Action [The official settlement site gives this phone number: 1-855-604-1743 ]
2019. If you owned any MFGP stock on Apr 30, 2019: A hedge fund pressured Micro Focus to sell the profitable SUSE Linux business.
US ADR holders received 0.8296 new MFGP "B" shares (CUSIP 594837403) plus $4.30 cash on May 20, 2019, replacing each original "A" share (CUSIP 594837304.) ($4.35 minus a $0.05 Deutsche Bank fee.) Official Details More Official Details
"Effective April 30, 2019, ADR shareholders will be required on a mandatory basis to surrender their ADRs to DBTCA [Deutsche Bank Trust Company Americas] for cancellation and exchange for 0.8296 new American Depositary Shares (“ADS”) (CUSIP: 594837403) for every 1 old ADS (CUSIP: 594837304). Cancellation fees will not be assessed. Fractional ADSs will not be allocated, in lieu, aggregated fractions will be sold and the net proceeds will be distributed to the entitled ADR shareholders... ADR Payable Date: May 20, 2019." --from the US ADR Corporate Action Notice Notices about this transaction do not appear to have been mailed to US shareholders.
Reporting to the IRS about the 2019 Micro Focus "Return of Value."
- Due to the cash payment, this transaction is taxable.
- If you acquired MFGP through the HPE spinoff, and accounted for it as HPE's outside tax counsel recommended in 2017-- therefore paying tax on a theoretical 2017 capital gain -- the cost basis for the new "B" shares would be ($29.34 per "A" share) / (0.8296 "B" per "A") = $35.37 per "B" share. Be sure you note this in your own records (and in your broker's records, if your broker tracks cost basis) -- so that you don't pay tax twice on the same "gain."
2020. The MFGP dividend announced for 2020 was withdrawn at the last minute and not paid: Fidelity reported this correctly. Some brokerages and stock information services did not.
2023. If you owned any Micro Focus (MFGP; CUSIP 594837403) stock on Jan 31, 2023: Micro Focus was bought for cash by OpenText at almost double the market price. Micro Focus stock has been delisted -- it is no longer traded. Either $6.43 per MFGP "B" share was paid into your brokerage cash account or a check was mailed by Feb 14, 2023. This does not affect your right to claim under the class action settlement, below, which is based on events from 2017 to 2019. Details of payout: Official London Stock Exchange notice (Deal announced 2022-08-25.)
The cash payment is taxable.
If the 2017 spinoff is treated as HPE's outside tax counsel recommended in 2017:
Back on Apr 30, 2019, US ADR holders received
0.8296 new MFGP "B" shares -- replacing each original "A" share.
The cost basis is then
$29.34 / 0.8296 = $35.37 per "B" share. The net loss after the
OpenText sale is then $35.37 - $6.43 = $28.94 per "B" share.
For certain quarters, the net
loss after the OpenText sale is somewhat higher -- ranging from $29.65
to $34.82 per "B" share. This applies only to MFGP stock derived from
these employee stock purchase lots:
5/1/00, 8/1/00, 11/1/00,
10/3/07, 1/2/08, 4/2/08, 10/7/09,
11/1/09, 1/6/10, 4/7/10, and 5/1/10. To download the HPAA's employee stock purchase spreadsheet:
https://www.hpalumni.org/StockSpread
Be sure you note this in your own records (and in your broker's records, if your broker tracks cost basis) -- so that you don't pay tax twice on the same "gain."
The HPAA's employee purchase spreadsheets.
- Official quarterly cost basis data for every HP stock purchase from 1959 through 2000 -- with resulting calculated lot-by-lot cost basis for HPQ, Agilent, Keysight, HPE, DXC, Micro Focus "A" shares, Micro Focus "B" shares and sale to OpenText.
- Estimate your average cost basis over any span of HP employment from 1959 through 2000 for HPQ, Agilent, Keysight, HPE, DXC, Micro Focus "A" shares, Micro Focus "B" shares.
- Calculate ordinary income/capital gain lot-by-lot from 11/2000 to 10/2017 for HPQ, Agilent, Keysight, HPE, DXC, and Micro Focus "A" shares.
To download the HPAA's employee stock purchase spreadsheet: https://www.hpalumni.org/StockSpread
We recommend that you work through your HP-related stock situation step-by-step.
If you haven't already done so, start here: Stock Recovery and Cost Basis
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