Korro Bio became a publicly traded company by completing its merger with Frequency Therapeutics on 11/3/2023. Prior to the merger FREQ implemented a 1 for 50 reverse stock split. While Frequency was legally the surviving company, it changed its name and ticker symbol simultaneously with the merger to Korro Bio (KRRO). On a practical level, Korro is the surviving company. Frequency shareholders also received one CVR (conditional value right) for each post reverse split share still owned. These value rights will not be publicly traded. According to the SEC documents filed regarding this merger, distributions associated with the CVR will most likely be treated as dividends in the future. However, there is uncertainty about the treatment of the CVRs. It is possible they may be treated as current additional value received in the merger. This may change the nature and tax treatment of the merger. These instructions will assume the merger is treated as a tax-free reorganization.
Resolution: Due to the nature of this merger, the transaction can be entered in 2 different ways with the same tax consequences. For Frequency Therapeutics shareholders, this can be entered as a reverse stock split, followed by a name and ticker symbol change. Entering the transaction in this way will cause return figure for the company on the Valuation Statement to include the entire holding period of Frequency from the first purchase up to the time it is traded as Korro.
The other method to enter this transaction is to enter it as a merger of Frequency into Korro. Using the merger transaction will cause the return figures for Korro to start with the merger date. This may be more desirable, especially if the management after the merger changed significantly from the Frequency management team. The return figures would then show how new management is performing.
The CVRs will be ignored until payments related to them are received.
The Reverse Split Method
Use the Stock Split transaction.
Step 1
Step 2
Step 3: Change name and ticker symbol
Go to Accounting > Securities > Change Company Name or Ticker
The Merger Method
Go to Accounting > Securities > Merger
Step 1
Step 2
