When does a spin-off start having returns?
When-issued market mechanics, the CRSP convention, and how RiskModels incorporates spin-off pricing — the IBM/Kyndryl case
Conrad Gann · Blue Water Macro · Data Note · June 2026
Two careful data sources can disagree about a spin-off's returns — on exactly two kinds of days — while both being internally consistent. This note documents the mechanics behind that disagreement, states precisely when RiskModels begins using a spun-off company's data, and contrasts it with the CRSP (WRDS) convention. The worked example is the Kyndryl (KD) spin-off from IBM in November 2021.
The key insight is not a data-quality question. It comes from the mechanics of the when-issued market — a real, exchange-sanctioned market in shares that do not exist yet — and from where each methodology chooses to draw the line on using its prices.
The when-issued market
In a spin-off, there is a gap between the day the distribution is fixed and the day the new shares are delivered. For IBM/Kyndryl:
- Record date — Oct 25, 2021: IBM holders of record become entitled to 1 KD share per 5 IBM shares.
- Distribution date — Nov 3, 2021: KD shares are delivered.
- Regular-way trading — Nov 4, 2021: KD trades as an ordinary listed security.
Starting Oct 22 — before any KD share existed — the NYSE opened a when-issued market ("KD WI"): binding trades in the entitlement to shares, with settlement deferred until after the distribution. Had the spin-off been cancelled, all when-issued trades would have been voided. In parallel, regular-way IBM traded with due bills attached through Nov 3, so IBM buyers in that window still received the KD distribution — which is why IBM's price did not drop until Nov 4.
When-issued prices are real price discovery. Volume is thinner and the participants skew institutional, but the trades are binding and arbitrage-linked to the regular-way market that follows: the last when-issued close and the first regular-way price are mechanically the same instrument.
Where each methodology draws the line
RiskModels (built on exchange-tape vendor data) carries the when-issued tape under the regular ticker. KD's price history therefore begins Oct 22, 2021 — the first when-issued print — with the first return on Oct 25 (the first day with a prior close). The transition from when-issued to regular-way is continuous; no special handling is applied, and none of the pre-listing history is synthesized.
CRSP books when-issued trading separately (its own identifier, flagged as a when-issued share class) and starts the regular security at regular-way trading with the first return missing. KD's first CRSP return on the main identifier is Nov 5, 2021.
Both choices are defensible. RiskModels' convention captures ten extra trading days of genuine price discovery on the new entity; CRSP's convention guarantees every return is computed within a single trading regime. The consequence is that a cross-check between the two will show "mismatches" on every day from the first when-issued print through the first regular-way day — dates on which, in CRSP's framing, the security does not yet exist.
Kyndryl, day by day
| Date | KD close | RiskModels return | CRSP-convention return | Regime |
|---|---|---|---|---|
| 2021-10-22 | 40.75 | NaN (first observation) | — not covered | when-issued |
| 2021-10-25 | 37.85 | −7.12% | — not covered | when-issued |
| 2021-10-26 | 35.50 | −6.21% | — not covered | when-issued |
| 2021-10-27 | 33.00 | −7.04% | — not covered | when-issued |
| 2021-10-28 | 32.00 | −3.03% | — not covered | when-issued |
| 2021-10-29 | 31.50 | −1.56% | — not covered | when-issued |
| 2021-11-01 | 33.50 | +6.35% | — not covered | when-issued |
| 2021-11-02 | 31.25 | −6.72% | — not covered | when-issued |
| 2021-11-03 | 28.50 | −8.80% | — not covered | distribution date |
| 2021-11-04 | 26.38 | −7.44% | missing (first day) | regular-way begins |
| 2021-11-05 | 24.25 | −8.07% | −8.07% | identical from here on |
| 2021-11-08 | 23.75 | −2.06% | −2.06% | identical |
Two things are worth noting. First, the when-issued slide from 40.75 to 28.50 was genuine: the market repricing standalone Kyndryl ahead of delivery. Second, the −7.44% on Nov 4 — the day CRSP reports as missing — is a real move whose denominator happens to be a when-issued close. Discarding it would delete information, not noise.
Not a ratio imputation
A natural suspicion is that pre-Nov-4 KD prices are synthesized from IBM via the 0.2 distribution ratio. The arithmetic rules this out:
| Date | IBM close | IBM × 0.2 (imputed would be) | Actual KD close |
|---|---|---|---|
| 2021-11-01 | 126.28 | 25.26 | 33.50 |
| 2021-11-02 | 126.18 | 25.24 | 31.25 |
| 2021-11-03 | 127.13 | 25.43 | 28.50 |
The when-issued prints sit 12–30% above any ratio-scaled IBM price, the gap changes daily, and the two series move independently — on Nov 3, KD fell 8.8% while IBM rose 0.75%. A ratio-imputed series would be perfectly correlated with the parent by construction. KD's series also starts abruptly at Oct 22 (the when-issued open), not at some arbitrary lookback depth, which is the signature of an independent tape rather than a back-filled transform.
The parent's ex-date return: one day, one wedge
The second — and subtler — divergence is in the parent's return on the ex-date, and it persists even after the child's coverage question is settled.
IBM's raw price drop on Nov 4 was −4.94% (127.13 → 120.85), most of which is the value of the distributed Kyndryl shares leaving the stock. Any total-return methodology adds that value back. The conventions differ only in which KD price values the distribution:
- CRSP values the distribution at the child's same-day (ex-date) close: (120.85 + 0.2 × 26.38) / 127.13 − 1 = −0.79%. This measures the realized wealth change of a holder who received the shares.
- Vendor adjustment factors (the standard commercial-data approach, used by the tape behind RiskModels) are fixed before the ex-date open, so the distribution is valued at the child's price known beforehand — the when-issued close / opening indication, here ~27.8: (120.85 + 0.2 × 27.80) / 127.13 − 1 = −0.57%.
| Date | IBM close | KD close | RiskModels return | CRSP-convention return |
|---|---|---|---|---|
| 2021-11-01 | 126.28 | 33.50 | +0.94% | +0.94% |
| 2021-11-02 | 126.18 | 31.25 | −0.08% | −0.08% |
| 2021-11-03 | 127.13 | 28.50 | +0.75% | +0.75% |
| 2021-11-04 | 120.85 | 26.38 | −0.57% | −0.79% |
| 2021-11-05 | 123.61 | 24.25 | +2.28% | +2.28% |
| 2021-11-08 | 124.54 | 23.75 | +0.75% | +0.75% |
The entire gap is the child's own first-day move scaled by the distribution ratio:
0.2 × (27.80 − 26.38) / 127.13 ≈ 22 bp
Every other day matches exactly. The wedge appears only on spin-off ex-dates, is bounded by distribution ratio × child's first-day move ÷ parent price, and nets out over any multi-day window — both series converge on the same prices immediately afterward. Neither number is an error: one is an ex-ante adjustment factor, the other an ex-post realized total return, and they answer slightly different questions on one day.
Summary of conventions
| Question | RiskModels | CRSP |
|---|---|---|
| When does the child's price history start? | First when-issued print (e.g., KD: Oct 22, 2021) | First regular-way day (KD: Nov 4, 2021) |
| Child's first return | First when-issued day with a prior close | Missing on day one; first return on day two of regular-way |
| When-issued period | Included, under the regular ticker | Separate when-issued identifier |
| Parent's ex-date distribution valuation | Adjustment factor fixed pre-open (prior / when-issued price) | Child's same-day close |
| Are pre-regular-way prices imputed? | No — independent when-issued tape | n/a |
For model estimation the distinction is further insulated: a new listing enters the RiskModels universe only at a month-end rebuild, and beta estimation requires a minimum data density over a 126-day window, so the earliest (thinnest) when-issued days do not drive risk estimates. The convention difference is visible primarily on the per-ticker daily returns surface — and, as documented here, it is a difference in where two methodologies draw the same line, not a disagreement about what traded.