The term “Initial Public Offering” (IPO) is the process of a private company coming to the public market for the first time and offering shares in the business. It’s the ultimate accolade of a small company that can work its way up from nothing to offer ownership to a wider market whilst raising money in the process. Traditionally, these are exciting new companies to look for and analyze. Depending on the size of the offering, the fanfare around it can be deafening and can make investors excited. This occasionally forces those same investors into purchasing shares in a company that they know very little about and haven’t really carried out full due diligence on. Sometimes this turns out to be a huge mistake.
What if you were offered a newly listed company that wasn’t the result of a manufactured process, no one was becoming rich with you buying it (except maybe you), there was no marketing or roadshow, and you could take your time and choose a price and valuation with very few (if any) analysts covering it? Would you be interested? I suspect you would at least consider it. Spinoffs, also known as company break-ups or demergers, are exactly the area to find these companies.