Chad Brand

Halliburton: Is Its Discount Warranted?

Another couple of reasons they would do this is to 1) avoid having a lot of selling pressure on KBR once the spin-off occurs, and 2) reducing the number of small investors in KBR.

If HAL shareholders are given a little bit of KBR (relative to their HAL stake), they will either sell the KBR stock when they get it because it is a just a small amount and doesn't really fit with their other regular sized positions, or they just keep it there. The result is either 1) lots of selling of KBR, or thousands of people owning odd-lots of KBR (under 100 shares), which is costly from a shareholder services prospective.

If they can get some investors to swap all of their HAL for KBR, those issues are reduced and HAL's total share count drops without the company needing to do a buyback.

If I owned HAL I would not trade HAL for KBR, but they are hoping some people will.