Gurnet Point Capital and Novo Holdings acquired Paratek Pharmaceuticals (PRTK) for  $2.15 cash and 1 Contingent Value Right (CVR) for each PRTK share. Gurnet Point Capital and Novo Holdings are privately held.

Resolution:

Because Gurnet Point Capital and Novo Holdings are privately held, this merger can be treated as a sale of PRTK. The sale proceeds are the sum of the cash received and the value of the CVRs received. According to the SEC filings for this transaction, the CVRs will be unregistered and will not trade on any exchange. The conditions and procedures for transferring ownership of CVRs are difficult. No information on the value of the CVR was readily available at the time these instructions were written. Research found there is great skepticism the conditions to pay out the CVR will be met. Using all of the above facts it is not unreasonable to assume a current value of zero to the CVR and deal with any possible cash payment from the CVR in the future, if/when they occur.

Any cash received in the future from the CVR will be accounted for as a long term capital gain distribution. These instructions will include how to account for any CVR payment received in the future.

The method adopted here will defer some capital gain to when any cash from the CVR is actually received and simplify accounting for this cash by making it all capital gain rather than a mix of capital gain and return of capital.

The Paratek merger as a sell transaction

Use the Sell security transaction.

Step 1

• Date: 9/21/2023
• Ticker: PRTK

Step 2

• Click the Sell All link to populate the Shares sold. This link is at the end of the bold sentence just under the Step 2 text of the transaction entry page.
• Sale total: 2.15 x (# of PRTK shares owned)
• Commission and fees: See broker statement

Accounting for future cash received due to the Paratek CVR

• Use the Cash Distribution security transaction. This is the same screen as for a cash dividend.
  • Symbol: PRTK*  (PRTK will have the * to denote it is inactive in your portfolio)
  • Payout date and ex-dividend date: Use the same date
• Amount: Use the actual cash received. The maximum will be $0.85 per PRTK share owned at the time of the merger.
• Type: Long term capital gain