News & Press

Real Money – What to Do With AT&T and Warner Bros. Discovery After the Split

Real Money – What to Do With AT&T and Warner Bros. Discovery After the Split

As most investors are aware, AT&T (T) has just undergone a significant change. The telecom firm combined its WarnerMedia with Discovery operations to create a new global entertainment company called Warner Bros. Discovery, Inc. (WBD). Three leading advisors, all contributors to MoneyShow.com, look at the spinoff and suggest what both growth and income investors should do with these new “separate” entities.

From Jim Osman’s commentary: “There have been nine Reverse Morris Trust (RMT) transactions over the past five years (2017-22), with a total of 18 companies resulting from these separations. Of those 18 companies, 11 were S&P 500 Index names, and examining their performance against the S&P 500 Index shows that the opportunities to gain outperformance to the Index typically fall within the first month, though that outperformance is a very slim 0.7% above the S&P 500 Index. More importantly, investors made money on eight of the 11 names by the one-year mark with an average return of 18% (which jumps to a 33% total average return if the three companies that lost money are removed), indicating that while S&P 500 RMTs do not necessarily outperform the Index by the one-year mark, investors can still expect these transactions to result in positive returns around 72% of the time.”

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Bloomberg – Ghost of Valeant Haunts Bausch Health Spinoffs

Bloomberg – Ghost of Valeant Haunts Bausch Health Spinoffs

Investors are on tenterhooks for the potentially imminent launch of a pair of initial public offerings in Bausch Health Co.’s eye-care and skin-care units. But tens of billions of dollars in debt left over from its days as Valeant Pharmaceuticals remain a big question mark.

“There are people who were burned by the old Valeant deal, so there’s kind of a shadow hanging over it still,” said Jim Osman, founder of The Edge Consulting Group — a research firm that specializes in spinoffs. At the same time, “there’s an overhang of value about it,” he said.

Despite the Valeant stigma, analysts at The Edge say investors should buy shares of the parent in advance of the separations. They believe the presence of big-name holders like Icahn Enterprises and GoldenTree Asset Management indicate that some value will be created through the transactions. “On one hand you see the amount of bad news and the depressed stock price; but on the other hand, you have quality management and shareholders,” Osman said. “It’s set up to be one of the greatest three-way splits ever in terms of valuation.”

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Spinoff Expert Tunes in to Warner Bros. Discovery

Spinoff Expert Tunes in to Warner Bros. Discovery

Warner Bros. Discovery has become the third largest streaming media powerhouse behind Netflix (NFLX) and Disney (DIS) — and operates with the following segments: Advertising, Distribution and Content Generation (together contributing 65% to revenues at $33.8 billion in FY23E). In addition, the fast-emerging Subscription (Direct to Consumer) business (contributing 35% to revenues at $18.2 billion in FY23E), contains such brands as Discovery, Food Channel, HGTV, TLC, Animal Planet, HBO, CNN, Cartoon Network, Adult Swim, Boomerang, Warner Bros., and many others.

We anticipate dividend-focused selling pressure. With ex-parent AT&T paying a good dividend yield of about 6% and a 1.5% stake (108m shares outstanding) being held by dividend focused funds, with WBD not expected to pay any dividends in the near-term, we calculated close to 26m shares of selling to take place.

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Value Crunch Fuels IPO Plans for CI Wealth Management

Value Crunch Fuels IPO Plans for CI Wealth Management

A plan by CI Financial Corp. to spin off its U.S. wealth-management represents the next phase of a pivot by management toward stabilization after a spree of acquisitions, according to an analyst who specializes in spinoffs. Shares in the Canadian wealth management firm jumped the most in three weeks on Thursday after the company confirmed its intent to sell up to 20% of the unit through a U.S. initial public offering, with proceeds earmarked to repay debt. The soon-to-be-carved-out company will have $133 billion under management after acquiring more than 30 asset managers since 2020.

Lower organic growth and pressure on fees have been driving asset managers to reduce debt as the company moves forward with its plans to unlock value in the unit, said Jim Osman, chief executive officer at The Edge Consulting Group. “The low-cost, index-based products pressure seems to be increasing on everyone, including CI, and they look to stabilize the business by this move,” he said in an interview. The stabilization maneuver however, doesn’t necessarily mean traders should embrace the shares. “Investors should be cautious about buying these types of IPO when the offering doesn’t have a primary value creative focus,” Osman said.

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Company Spinoffs Help Fill U.S. Market’s IPO Void

Company Spinoffs Help Fill U.S. Market’s IPO Void

A flow of corporate spinoffs is providing some much-needed activity in U.S. equity capital markets, as companies look to slim down or unlock value in parts of their businesses. The prospective transactions are shaping up as a rare source of new share sales in the U.S. An extended stretch of market volatility is quashing companies’ appetite for initial public listings, leading to the longest drought in more than a decade.

The trend also comes against a backdrop of soaring long-term interest rates, with Federal Reserve officials signaling they could start tightening policy more aggressively to battle elevated inflation. So for companies, the rising cost of capital is a major part of the decision-making process that is making spinoffs more appealing.

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Airbnb Stock Has A Purpose and CEO Chesky Is Proving A Visionary. This Could Drive The Stock 50% Higher.

Airbnb Stock Has A Purpose and CEO Chesky Is Proving A Visionary. This Could Drive The Stock 50% Higher.

There is a reason why Warren Buffet and Charlie Munger have never bought a new issue (IPO). It’s because they are manufactured investments, orchestrated in such a way that the investor gets the worst deal possible. I concur. The very thought of a group of people who make the optimum amount of money by selling you an investment at the highest possible price just makes my stomach turn. Wind it back to my previous article on Uber Technologies, Inc. (UBER) and the initial sale to the public. The stock took two and a half years to become interesting again. It was one of the highest-level pump and dumps I’ve seen, and I’ve seen a few having spent 30 years in the business.

You rarely see an IPO cheap on a value basis. Usually, I wait until the snap crackle and pop to die out and look in the wreckage of discarded names when they are forgotten about and unloved. Spinoffs are similar investments in that respect, although they are less manufactured and, quite honestly, a better place to dig for gold. However, every now and then an interesting fallen IPO appears with the correct ingredients.

Bring on Airbnb, Inc. (ABNB). Chief Executive Brian Chesky is one of the humblest billionaires on earth. He’s gone from zero to being worth a staggering $1.9 billion in a short space of time. The Co-Founder, CEO, Chairman and Head of Community of the tech juggernaut kicked off the firm’s life in San Francisco 14 years ago because he could not afford to pay his rent. And like most great things, Airbnb was born out of necessity, not greed.

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3 Investing Experts Share Their Outlook for DWAC & CFVI

3 Investing Experts Share Their Outlook for DWAC & CFVI

Digital World Acquisition Corp. (DWAC) and Cantor Fitzgerald Acquisition VI (CFVI) have both experienced a surge in interest from retail investors in recent months due to their proposed mergers with Trump Media and Rumble. Both stocks are SPACs – special purpose acquisition companies. These blank-check vehicles raise money through an IPO, and then aim to acquire or merge with another company. The SPAC market raised $96 billion in the first quarter of 2021 alone, according to the Harvard Business Review.

Until a merger is complete, SPACs have no underlying value. Even if the deals happen, the business case for a new conservative media outlet remains low, according to Jim Osman, who founded the specialist research firm the Edge Consulting Group. “Is there room for another social-media platform? I don’t think there is,” he told Insider in November. “Parler tried to appeal to a conservative audience, and that pretty much got wiped out.”

Insider asked three investing experts for their views on DWAC and CFVI. All three compared the two SPACs with last year’s “meme stock” trading frenzy, when retail investors pumped up the price of previously unloved companies like GameStop and AMC. The three investors also warned that, as with meme stocks, there’s a strong chance that some retail investors get burned by these SPACs.

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Colfax: A Spinoff Bet on the Rales Brothers

Colfax: A Spinoff Bet on the Rales Brothers

The Edge’s data shows what may be the next step in the Rales brothers value creation process. The Rales brothers are the co-founders of Danaher (DHR) and are known for their hugely successful Spinoff of Fortive (FTV) in 2016. The Edge believes the brothers will be using the same playbook to Spinoff Colfax’s “FabTech” business (to be spun off as ESAB) from its “MedTech” business — the parent after the Spinoff, which is to be renamed Enovis — via a tax-free distribution.

A key insider is buying pre-spin off, and The Edge’s recently updated activist study also points to upside potential.

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Turo Peers Burn Out as Car-Sharing IPO Looms

Turo Peers Burn Out as Car-Sharing IPO Looms

Weak trading by peers is complicating an initial public offering from car-sharing firm Turo Inc. Turo, which filed for an IPO earlier this month, is nearing public markets during a crossroads for stocks exposed to the so-called gig economy. Uber Technologies Inc. and Airbnb Inc., for example, have underperformed during the wild market swings that started the year, a trade that resumed on Tuesday.

Despite the negative tone, potentially big returns for early investors could help this deal press forward, according to analysts at special situations research firm The Edge Consulting Group. “On preliminary numbers, IAC/InterActiveCorp. could stand to make around $500 million from Turo’s IPO, nearly doubling its FY19 investment in the peer-to-peer car sharing business,” The Edge Consulting Group’s Chief Executive Officer Jim Osman said in an interview.

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IAC Has Created $128bn of Value for Shareholders & There’s More To Come. Here’s Why…

IAC Has Created $128bn of Value for Shareholders & There’s More To Come. Here’s Why…

What happens when metrics are at the higher end of expectations? Government stimulus money has run dry and mostly everything is priced in. What do you do next? Smart managements have recognized hidden value inside themselves and have given shareholders enormous returns. Specifically with Spinoffs.

Even before the Vimeo Spinoff, in their Q1 2021 Shareholder Letter, the company claims nearly $100 billion of value has been created since Mr. Diller took control of what became IAC in 1995. IAC is currently only a $12 billion market cap company. The Edge puts the value creation now nearer to $128 billion, with more on the way.

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