Investments: Du Pont Divests

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The Chicago federal court that ordered the Du Pont Co. to surrender control of its 63 million shares of General Motors stock (TIME, March 9) also suggested a way. Last week Du Pont President Crawford Greenewalt announced that the company would follow Judge Walter La Buy's proposal to distribute the G.M. shares among Du Pont stockholders. In July, Du Pont will distribute the first 23 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 February 1965 deadline set by the judge. Each holder of one Du Pont share will ultimately wind up with 1.37 G.M. shares.

For most Du Pont stockholders, the method will be painless when it comes to taxes. Congress has specified that individual shareholders will not be required to pay tax on the G.M. stock unless they bought their Du Pont 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 market value of 1.37 G.M. shares is only $68.50, most Du Pont shareholders will pay no tax at all.

But the biggest of Du Pont shareholders, the family-controlled Christiana Securities, will have to pay $26 million in dividend taxes on the 6.7 million shares it will receive in the first distribution alone—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 affect the prices of both G.M. and Du Pont shares. Most market analysts agree that G.M., which expects a near-record sales year, should be able to withstand the shock. Even Du Pont, though its dividends will drop with the loss of its income from the G.M. shares, should bounce back. Said one specialist: "At present prices, Du Pont would still be selling at about 20 times earnings, and this is in line with other chemical stocks."