Spinoff Report
KAR & IAA: First Insurance Auction Spinoff Continues Outperformance, Parent Exits MP
KAR Auction Services, Inc. (KAR) and IAA, Inc. (IAA) have continued their performance divergence since their split in June 2019, with the Spinoff (IAA) demonstrating its strong growth potential while the parent (KAR) has taken hits on its second earnings miss in a row on the back of a $5m inventory loss and lowered guidance. KAR's longer-term catalysts are still intact for those willing to wait, and IAA is expected to continue with its bolt-on acquisitions and partnerships for the near-term.

  • Investors Recommended to Exit KAR & Hold IAA / Lack of Catalysts for KAR & Plenty of Value Creation Ahead for IAA
  • KAR: Near-Term Buyback Nearly Complete / Missed Earnings / TradeRev Segment to Break Even Post-FY20E
  • IAA: Strong International Growth / Bolt-On Acquisitions & Deleveraging are Top Priorities / Duopoly Supports Margin Improvement
  • Activist Starboard Value Sold Positions in Both Companies / Base Case Target Price Revised (KAR) & Maintained (IAA)
  • KAR Exits the Spinoff Model Portfolio at the End of Today's (November 19) VWAP / IAA Remains MP Holding
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