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Spin-off creates stock-price confusion

Shares of consulting firms Technology Solutions Company and eLoyalty rise after the spin-off is completed, but the transaction creates confusion about the value of the shares.

Shares of Technology Solutions rose today after the company completed a spin-off, but the nature of the transaction caused some confusion about the price of the shares.

Some Web finance sites that quote stock prices listed shares of Technology Solutions as falling by as much as 80 percent while other sites posted a jump of more than 300 percent. The truth was somewhere in between.

Both companies have been trading under a single ticker symbol since Feb. 10, and investors could only buy shares of eLoyalty on a "when issued" basis. That meant they could buy the shares but not officially own them until today, when the spin-off was completed.

An investor who buys shares on a when-issued basis is making a bet that the shares will go higher when the stock begins trading on its own.

Shares of the combined company closed at $37.94 yesterday, with eLoyalty valued at $35.88 and Technology Solutions at $2.06.

At the close of regular trading today, Technology Solutions climbed to $7.63, while eLoyalty ended at $39.38.

The shares of Technology Solutions, which designs and manages computer systems for large companies, are undervalued as a result of the spin-off, said Brian Maimone, an analyst with ING Barings, who rates Technology Solutions a "strong buy."

"The valuation didn't make sense," Maimone said. "This is the first opportunity to go in and buy the TSC name."

Bloomberg contributed to this report.