spinoffs
A spinoff takes place when a company decides to get rid of a portion of its asset base, possibly because it wants to focus its activities elsewhere, but is unable to sell the assets for a price that it feels reflects their value. Instead, the parent company sets the assets up as a separate company, then hands out shares in that publicly listed firm to its current investors.
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Look beyond the “hot” IPOs listed in Canadian stock market news and look for the less noticeable spinoffs to increase the potential for profitable investing
Follow these Successful investment rules to help you find winners like spinoffs—and avoid potential losers like new issues
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Our Spinoffs, Takeovers and Special Situations newsletter focuses on the three types of investment opportunities in its name. Huntsman and Danaher were two of our earliest recommendations in the Spinoffs area. Each had just completed a spinoff of a smaller business.
In July 2016, Danaher handed out 100% the shares in its Fortive subsidiary to its own shareholders, as a special dividend....
In July 2016, Danaher handed out 100% the shares in its Fortive subsidiary to its own shareholders, as a special dividend....
Our Takeover Target Rating considers a range of factors to determine the chances of a spinoff company attracting takeover interest in the short to medium term:
We look for a profitable spinoff with low debt and with hidden assets. As well, spinoffs with no major shareholder and facing little regulatory or anti-trust constraints have strong appeal.
Does the spinoff have an affordable market value, meaning it’s a manageable purchase for a major industry competitor? Spinoffs with top-quality, but underperforming, assets also attract takeover interest....
We look for a profitable spinoff with low debt and with hidden assets. As well, spinoffs with no major shareholder and facing little regulatory or anti-trust constraints have strong appeal.
Does the spinoff have an affordable market value, meaning it’s a manageable purchase for a major industry competitor? Spinoffs with top-quality, but underperforming, assets also attract takeover interest....
We think that spinoffs are the closest thing you can find to a sure thing for two main reasons:
- The management of a parent company will only hand out shares in a subsidiary to its own investors if it’s all but certain that business, and the parent, will be better off after the spinoff.
- Spinoffs involve a lot of work and legal fees....
Before you let trading rules or market indicators influence your investment decisions, it’s a good idea to check them for signs of the Gambler’s Fallacy. This is a logical error that gamblers make, but it also turns up in a lot of investor thinking. The simplest way to explain it is to show how it works in a coin toss.
Often, people intuitively feel that after heads comes up in a series of coin tosses, the next toss is increasingly likely to come up tails....
Often, people intuitively feel that after heads comes up in a series of coin tosses, the next toss is increasingly likely to come up tails....
The rising stock market and improving economy in the U.S. over the past couple of years have spurred investor demand for new stock issues (also known as IPOs, short for initial public offerings). If this tempts you, it pays to keep in mind that new share issues only come to market when it’s a good time for insiders or the company to sell....