Paired Shares

What Are Paired Shares?

Paired shares are the stock of two separate companies that operate under the management or supervision of a single corporation. Paired shares are publicly-traded as though they are one stock and are sold as one unit. They are likewise called "Siamese Shares" and "Stapled Stock."

How Paired Shares Work

Purchasing paired shares means investing in the common stock of two corporations run by a similar team. The companies are joined at the hip and can't be separated from one another, so investing in one means investing in the other also — they trade together as one security on the stock exchange.

Separate stock certificates are not for the most part issued to mirror the stakes in two separate companies that paired shares offer. The stock of the two companies normally shows up on one stock certificate, with each stock imprinted on one side of the document.

By and large, one stock spotlights on income, yielding a higher dividend, while different targets capital appreciation and has a greater potential for growth.

Instances of Paired Shares

Nowadays, paired shares are genuinely uncommon in the U.S. Be that as it may, there are a couple of models. Fair Corp. (CCL) and plc, the British-American journey operator referred to beforehand as P&O Princess Cruises plc, completed a dual-listed company transaction in April 2003.

Shares of Carnival Corp. common stock were paired with trust shares of beneficial interest in the P&O Princess Special Voting Trust. As part of this interaction, every holder of Carnival Corp. stock was given an equivalent number of these new shares, alluded to as the "trust shares" or "paired shares."

Another model is Extended Stay America Inc. (Remain). The budget, extended-stay lodging chain is publicly traded as a paired share with the owner of its inns, real estate investment trust (REIT) ESH Hospitality Inc. (Remain) — as may be obvious, the two companies share the equivalent ticker.

One share of Extended Stay America Inc. common stock, with a par value of $0.01, along with one share of ESH Hospitality Inc. Class B common stock, par value of $0.01, are joined and trade as a single unit.

History of Paired Shares

The paired-share structure was well known in the REIT business until the Internal Revenue Service's (IRS) Restructuring and Reform Act of 1998, enacted by the Clinton Administration, ended the dubious corporate tax benefits that it worked with.

During the 1980s, paired-share REITs could possess their properties while a joined traditional corporation operated them, with the two companies trading as a single entity. Through this structure, the REIT stayed away from taxes in light of the fact that the operating company could transfer the majority of its revenues to the REIT by means of rents.

By 1984, Congress disallowed the formation of new paired-share REITs however permitted a couple of existing paired-share REITs to go on as a legacy, including Starwood Hotels and Resorts, Patriot American Hospitality, MediTrust, and First Union Real Estate.

Be that as it may, when Starwood purchased ITT Corp. for $14.6 billion out of 1998, the Treasury Department and Congress started to endorse legislation that totally put a stop to this loophole. Following the IRS bill's enactment in July 1998, Starwood transformed from a REIT to a traditional corporation, really ending the paired-share structure.

Features

• Paired shares are publicly traded as though they are one stock and are sold as one unit.
• Typically, one stock yields a higher dividend, while different has a greater potential for growth.
• Paired shares are the stock of two separate companies that operate under the management or supervision of a single corporation.
• The stock of the two companies ordinarily shows up on one stock certificate, with each stock imprinted on one side of the document.