IB Net Payout Yields Model

Spin-Off Mania Benefits Alert Investors

The major difference between an IPO and a spin-off is that one gets major media 'spin', while the other can be vastly ignored. The lack of a major financial transaction-- and hence, fees-- tends to reduce the push by investment houses. Just by viewing articles posted on this very website one can quickly derive that the general public has less interests in spin-offs versus IPOs, to their own detriment. This provides a major advantage to alert investors. Outside the major spin-offs, like the upcoming ones at Kraft (KFT) and ConnocoPhillips (COP), the others fall under the radar by the investing community.

Historically, spin-offs have provided solid returns for savvy investors. This is partly due to investors ignoring or not understanding the new security, but also because spin-offs allow both the parent and the spun off company to thrive, with each management team free to focus on its direct business.

A few interesting spin-offs took place around year-end to little or no fanfare.

TripAdvisor (TRIP) from Expedia (EXPE) - See presentation
WPX Energy (WPX) from Williams Energy (WMB) - See presentation
Orchard Supply Hardware (OSH) from Sears Holdings (SHLD) - see presentation

Read the full article at Seeking Alpha.

Disclosure: No positions mentioned. Please review the disclaimer page for more details.


Anonymous said…
Jane Seacrest said…
Thanks for differentiating an IPO and a Spin-off. As a beginner in option trading, this post help me out in understanding how the stock market behaves.
Stanley said…
Starters are always advised to learn various stock market terms and options trading tips to have better chances of succeeding.

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