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Summary

On 18 February 2024, Capital One Financial Corporation (NYSE: COF) and Discover Financial Services (NYSE: DFS) announced a merger agreement under which Capital One would acquire Discover in an all-stock transaction. Stockholders of both companies approved the merger at special meetings held on 18 February 2025, and the acquisition completed on 18 May 2025.

• Announcement date: 18 February 2024
• Stockholder vote: 18 February 2025 — approved by 99.8% of Capital One shares voted and 99.3% of Discover shares voted
• Completion date: 18 May 2025
• Deal structure: all-stock merger, valued at approximately $35.3 billion (Capital One reissued 256,497,213 treasury shares valued at $50.6 billion plus $1.1 billion of preferred stock, for total purchase consideration of $51.8 billion)
• Exchange ratio: 1.0192 shares of Capital One common stock for each Discover share held, plus cash in lieu of any fractional Capital One shares
• Post-close ownership: approximately 60% Capital One shareholders and 40% former Discover shareholders

All shares of Discover common stock were cancelled and converted into the right to receive 1.0192 shares of Capital One common stock, plus cash in lieu of fractional shares (the "Merger Consideration").

How the fractional share cash payment works

Because the exchange ratio (1.0192) rarely converts a whole-number Discover holding into a whole number of Capital One shares, Discover shareholders received whole Capital One shares plus a cash payment for the leftover fraction. For tax purposes, this fractional cash payment is treated as a sale of a small portion of the original Discover holding.

Worked example (100 DFS shares held):

• Total Capital One entitlement: 100 × 1.0192 = 101.92 Capital One shares
• Whole shares received: 101 Capital One shares
• Fractional Capital One share paid out in cash: 0.92 of a Capital One share
• Converting that back to Discover units sold: 0.92 ÷ 1.0192 = 0.9027 Discover shares

So for a 100 DFS share holding, 0.9027 Discover shares are treated as sold (for the cash-in-lieu amount received), and the remaining 99.0973 Discover shares roll over tax-free into the 101 whole Capital One shares received.

How to handle this in Sharesight

Step 1 — Record the sell trade for the fractional units under Discover (DFS)

1 – On the Overview page, select your DFS.NYSE holding

2 - Select Enter a new trade or adjustment

3 - Trade type: Sell

4 - Quantity: the fractional Discover share amount deemed sold (e.g. 0.9027 units for every 100 DFS shares held — calculate as (cash-in-lieu fractional Capital One share ÷ 1.0192))

5 - Trade date: 18 May 2025

6 - Price: Sharesight records a unit price, not a total amount, so this needs to be calculated. If the cash-in-lieu payment received was, for example, $50 in total, divide that by the Quantity entered in step 4 to get the unit price:

Unit price = Total cash-in-lieu amount received ÷ Quantity (from step 4)

For example, if you received $50 for 0.9027 fractional Discover units, enter a price of $55.39 ($50 ÷ 0.9027). This ensures Quantity × Price equals the actual cash amount received ($50).

7 - Select Save trade

Step 2 — Merge the remaining Discover holding into Capital One (COF)

1 – On the Overview page, select your remaining DFS.NYSE holding

2 - Select Edit holding tab

3 - Select Merge this holding

4 - Date of Merger: 18 May 2025

5 - New holding: Search: COF.NYSE

6 - Quantity: 1.0192 new COF shares for every remaining DFS share

For example, after recording the fractional sell trade above, the remaining 99.0973 DFS shares convert to 101 whole COF shares (99.0973 × 1.0192 ≈ 101).

7 - Select Save changes

The guide above is a suggestion on how to handle the corporate action in Sharesight and is not financial or tax advice. We advise you to consult your financial advisor or broker. We also encourage you to review the official documents for full details.