IBM stock splits and IBM stock dividends

The 26 May 1999 stock split is the 15th IBM stock split.  IBM has also had 26 stock dividend distributions.  A stock dividend is a dividend payment made to stockholders that is made in stock rather than cash. The last IBM stock split occurred in 1999 and the last stock dividend distribution occurred in 1967. View information on our 15 stock splits and 26 stock dividends.

Stock certificates for shares of IBM common stock that you are currently holding can be deposited with Computershare for safekeeping. The shares will be added to your balance of shares being held in book entry form. Call Computershare to obtain more information before sending your certificates. The phone numbers are 1-888-IBM-6700 or (781) 575-2727. You may also contact Computershare via email at ibm@computershare.com.

No. The stock split does not change your proportionate interest in the company.

IBM delivered stock split shares in 1997 and 1999 (the last two stock splits) using book entry. For stock splits prior to 1997, shares were delivered in certificate form and the stock certificates were mailed directly to the address of record for each stockholder. Stock split shares are credited to stockholder accounts on the payable date for the stock split. For example, the stock split record date for our last stock split was 10 May 1999 and split shares were credited to stockholders via book entry on the payable date of 26 May 1999. If a stockholder preferred a stock certificate instead of a book entry stock split credit, the stockholder could request one anytime after a split payable date.

You may liquidate (sell) your shares using one of the following procedures:

1. You may sell your shares directly through the transfer agent. The service charge per sale is USD 15.00 plus brokerage commission (currently USD 0.10 per share). Sale requests are usually processed on the day of receipt, provided receipt is received before 12 PM (ET).
2. You may request a stock certificate for your shares. You may then make arrangements with your broker, bank, credit union, or other financial entity to sell your certificate.
3. If you wish to sell or have your shares held by your bank, broker or other financial entity, you can arrange to electronically transfer your shares to your bank, broker or other financial entity by first calling Computershare and requesting an Authorization Form and instructions. The Form, properly completed and signed by all registered holders with the signature(s) guaranteed should be returned to Computershare, formerly known as EquiServe, at the address show on the book entry statement you received on or near 26 May 1999.  Your financial institution will be able to assist you in completing the Form. Your shares will be electronically transferred to the Financial Institution generally within 48 hours of the receipt of your Authorization Form, properly completed.
4. Computershare, formerly known as EquiServe, phone numbers and an Internet email address for the above services were provided on the stock split statement you received on or near 26 May 1999.

To determine the cost of full and fractional shares issued as a result of a stock split, a portion of the cost basis of the underlying shares on which the split was paid should be allocated to the new shares received. The cost basis of the underlying shares will then be reduced by the amount allocated to the new shares received.

For example, if the cost of one share of stock acquired prior to the record date for the 2 for 1 stock split was USD 100, the cost of that original one share is reduced by 50% as a result of the 2 for 1 stock split. That portion of the cost is then assigned to the one share received from the stock split. As a result of the stock split and the cost adjustment, the stockholder now has two shares, each with a cost basis of USD 50 a share. A cost adjustment should be made each time the stock splits.

Computershare Trust Company, N.A., formerly EquiServe, can be contacted by writing to P.O. Box 505005, Louisville, KY 40233-5005, by phoning (888) IBM-6700 or (781) 575-2727, or by e-mail at ibm@computershare.com.

For the 1999 stock split, stockholders at the close of business on 10 May 1999 received one (1) additional share for each share of IBM stock owned. Book entry statements for the additional shares were mailed to stockholders of record on or near 26 May 1999. (For example: if you owned 50 shares, you received a book entry statement for another 50 shares for a total of 100 shares).

How to adjust price to reflect a stock split

To determine the cost of full and fractional shares issued as a result of stock splits and stock dividends, a portion of the cost basis of the underlying shares on which the split or dividend was paid should be allocated to the new shares received using the figures on the list of stock dividends and stock splits. The cost basis of the underlying shares will then be reduced by the amount allocated to the new shares received.

For example, if the cost of one share of stock acquired prior to the effective date for the 2 for 1 stock split was USD 100, the cost of the original one share is reduced by 50% as a result of the 2 for 1 stock split and the cost assigned to the one share received from the stock split is 50% of the original cost of the one share. As a result of the stock split and the cost adjustment the stockholder now has two shares, each with a cost basis of USD 50 a share. A cost adjustment should be made each time the stock splits.

From just prior to the stock split record date, through the stock split distribution date, two separate markets  exist for IBM. The "regular way" market continued to trade at the higher, pre-split price. Since sellers in the market at the "regular way" pricereceive full value for the shares they sell, they are not entitled to the split shares they will receive by virtue of their being holders on the record date, so they transfer the split shares to their buyers by means of "due bills." The redemption date for due bills is 1 June 1999.

Stockholders might alternatively sell shares before the split distribution date at the lower post stock split price, and this is accomplished by the establishment of a "when issued" post-split price. The "when issued" price is approximately one-half of the regular pre-split price, to reflect the pending 2 for 1 split . "When issued" trading ceases after the market closes on the distribution date. When you sell shares at the lower "when issued" price you normally are entitled to receive the stock split shares on the shares you sold.

If you buy stock at the "regular way" price, you normally are entitled to receive the stock split shares. If you buy stock at the "when issued" price, you normally are not entitled to receive the stock split shares.

From 6 May through 26 May, IBM stock will trade at both the "regular way" and "when issued" prices and these prices will be reflected in the stock tables found in many newspapers and through other quote services. IBM will again trade at only one price on 27 May, the day after the stock split share distribution.

Unlike stock certificates, the book entry statement is not a negotiable document. While it is good practice to keep investment information in a secure place, if you lose your statement, Computershare can provide a duplicate statement on request.

IBM's stock split is not subject to US Federal income tax. However, when you sell stock split shares or any other shares of IBM common stock owned as of a stock split record date, you must adjust your cost basis to properly reflect this split in order to determine your gain or loss. You should contact your tax advisor with any questions you have about calculating your cost basis.

The existing IBM common stock certificates are still valid. DO NOT destroy them. All of your certificates should be kept in a safe place such as a safety deposit box, as they are valuable documents. You may send them in to Computershare for credit into your book entry account.

Book entry allows share ownership without stock certificates. This system is similar to that used with investments in a mutual fund or a corporate dividend reinvestment plan. You do not need to be enrolled in a dividend reinvestment plan to have book entry ownership.

Registered stockholders hold their book entry shares with the transfer agent, Computershare, which serves as the recordkeeper. When there is a transaction on the stockholder's account, the transfer agent records the transaction and mails a statement to the stockholder reflecting the transaction and the total number of shares owned. Stockholders may also request a book entry statement at any time.

When shares are held in book entry, you are relieved of the responsibility of storing a certificate and the risk of, and replacement cost associated with, the potential loss of the certificate. You can also sell book entry stock directly through the transfer agent or you can request a stock certificate at any time. Most IBM stockholders of record already have a book entry position at Computershare, formerly known as EquiServe. The 1997 two-for-one stock split was also handled with book entry.

IBM's last stock split was a 2 for 1 split payable 26 May 1999. The record date for this stock split was 10 May 1999.

Our stock transfer agent, Computershare, formerly EquiServe, mails the book entry statement to stockholders of record. You should have received your statement on or near 26 May 1999.

The corporation believed that the two-for-one split of common stock would result in a market price that should be more attractive to a broader spectrum of investors, particularly individual investors.

Book entry ownership provides these benefits to stockholders:

• You may sell book entry shares directly through the transfer agent;
• Stockholders no longer bear the risk of losing and the cost of replacing a stock certificate;
• Stockholders can electronically transfer book entry shares directly to their broker from the transfer agent;
• Book entry reduces the costs associated with issuing and delivering physical stock certificates.