What are the tax implications for shareholders and the companies involved?

Tax implications

Shareholders – In a typical “stock‑for‑stock” merger such as Heliogen’s acquisition of Zeo Energy, the exchange of shares is usually treated as a tax‑free reorganization under IRC §368. For most retail investors this means that the receipt of Heliogen shares in exchange for Zeo shares does not trigger an immediate taxable event; the tax basis and holding period of the original Zeo shares are carried over to the new Heliogen shares. The only taxable moment arrives when the investor sells the Heliogen stock: a capital‑gain or loss is recognized based on the original Zeo cost basis (adjusted for any “boot” or cash component, if any). If the merger includes a cash tender (a “cash‑plus‑stock” deal), the cash portion is taxed immediately as ordinary income or capital‑gain, depending on the structure, and the remaining stock portion retains the carry‑over basis. Investors who have held Zeo shares for more than a year will still qualify for long‑term capital‑gain rates on the eventual sale; short‑term holders will be subject to ordinary rates.

Companies – From a corporate‑level perspective, the merger creates a step‑up in the tax basis of the target’s assets to their fair market value at the acquisition date, which can generate future depreciation and amortization deductions for Heliogen. Any excess purchase price over the stepped‑up basis is recorded as goodwill and is subject to annual impairment testing rather than immediate tax deduction. Conversely, Zeo’s existing tax attributes (e.g., net operating losses) may be limited under the “Section 382” rules after the change of control, potentially reducing the value of those carry‑forwards for Heliogen. The combined entity will also need to consolidate tax filings, which can simplify reporting but may expose the group to a higher effective tax rate if the merger pushes earnings into a jurisdiction with a less‑favorable tax regime.

Actionable insight – For shareholders, the key is to verify whether the deal is strictly a stock swap or includes any cash component; if cash is present, plan for a short‑term tax hit on that portion. Maintain records of the original Zeo cost basis to correctly calculate future capital‑gain on the Heliogen shares. From a trading perspective, the tax‑free nature of the exchange removes a potential sell‑off pressure, supporting a neutral‑to‑bullish bias on Heliogen’s post‑merger price, especially if the market prices in the anticipated depreciation benefits and goodwill‑related upside. Investors with short‑term Zeo positions should consider closing before the merger to avoid the higher ordinary‑income tax rate on any immediate gains.