At The Edge, we are a leading investment research firm that possesses unmatched expertise in spinoffs. If you are looking for a dedicated research team that can provide stellar intelligence on public corporate spinoff situations and extensive, monthly advisory reports, then our expertise is what you can trust. What’s more, our coverage on spinoffs starts from the announcement date through the event date and even up to nine months post-spinoff.
The Edge | What Are Spinoffs?
Spinoffs are basically the creation of an independent company through the distribution or sale of new shares of an existing division of a parent company or business. Many financial experts regard spinoffs as a type of divestiture. Next, business owners, who wish to streamline their operations, normally sell unrelated subsidiary and less productive businesses as spinoffs. For instance, Company XYZ might spin off one of its mature business units that’s experiencing minimal or slow growth. This company does this so that it can focus on another service or product that brings higher growth prospects.
The companies that have been spun off are typically expected to be worth more as independent entities, rather than being part of a larger business. Spinoffs are quite common in the United States as there are approximately 50 spinoffs annually.
The Edge | Spinoffs Make Good Potential Investments
Although spinoffs do result in smaller companies being formed with their own unique dis-synergies, i.e., overhead costs pertaining to office space, management, etc., research shows that spinoff situations also result in leaner organizations that have the ability to focus on their core competencies. Since they are able to operate as a more focused company, they operate better in the long run. In addition, spun-off companies are normally mis-priced and/or misunderstood, which makes valuation attractive. All in all, you can see that these companies can make good potential investments.
The Edge | How We Evaluate Spinoffs
We carry out our research in a meticulous manner, which involves perusing critical documents like the spun-off company’s SEC Form 10 (which may be amended multiple times) or a Proxy. The latter exists if we are talking about a larger spinoff. We will be able to find out the core motives for the spinoff, determine if the company had operated independently by uncovering pro forma financial information, and more.
When we evaluate spinoff investment opportunities for our partners and clients, we also take into account inside participation information. We will help you find out if that company’s management received a significant part of their potential compensation in options or stocks. We will determine if their interests are aligned with shareholder interests. You should keep in mind that the largest gains for