Investments: Du Pont Divests

The Chicago federal court that orderedthe Du Pont Co. to surrender control of its 63 million shares ofGeneral Motors stock (TIME, March 9) also suggested a way. Last week DuPont President Crawford Greenewalt announced that the company wouldfollow Judge Walter La Buy’s proposal to distribute the G.M. sharesamong Du Pont stockholders. In July, Du Pont will distribute the first23 million on the basis of half a G.M. share for each Du Pont share.There will be two or three more such distributions before the February1965 deadline set by the judge. Each holder of one Du Pont share willultimately wind up with 1.37 G.M. shares.

For most Du Pont stockholders, the method will be painless when it comesto taxes. Congress has specified that individual shareholders will notbe required to pay tax on the G.M. stock unless they bought their DuPont stock for less than the value of the G.M. shares they receive.Since Du Pont stock is now selling around $214, and the current marketvalue of 1.37 G.M. shares is only $68.50, most Du Pont shareholderswill pay no tax at all.

But the biggest of Du Pont shareholders, the family-controlledChristiana Securities, will have to pay $26 million in dividend taxeson the 6.7 million shares it will receive in the first distributionalone—and will then be obliged to turn around and get rid of the G.M.shares itself. Even in a normal market, such an unloading could affectthe prices of both G.M. and Du Pont shares. Most market analysts agreethat G.M., which expects a near-record sales year, should be able towithstand the shock. Even Du Pont, though its dividends will drop withthe loss of its income from the G.M. shares, should bounce back. Saidone specialist: “At present prices, Du Pont would still be sellingat about 20 times earnings, and this is in line with other chemicalstocks.”