The Edge say Times are Changing, Activists’ Secret to Unlocking Value Falls Flat in Stock Market

By Dani Burger, Lu Wang, staff reporters, Bloomberg Business: Returns for spinoff stocks are trailing the S&P 500 in 2015.  “We’re seeing more of these forced company spinoffs,” said Jonathan Morgan, an analyst for Edge Consulting Group LLC, a Morristown, New Jersey-based research firm that analyzes spinoffs and special situations. “Because companies are doing poorly, there are more activists, and more activists forcing spinoffs, moving further away from value spins.” A representative of Icahn didn’t immediately respond to a request for comment while one for Rosenstein declined to comment.

Growing Pressure: Earlier this year, Rosenstein’s Jana Partners called on Qualcomm Inc. to consider spinning off its chipset business as part of a strategic review of options to boost shareholder value.  

“They’re not going out of fashion, and everyone is going to continue to focus on them. But it’s not the case anymore that you can do a blanket investment of spinoffs in the market,” Morgan said. “Hedge funds have to earn a buck for clients, especially activists. It’s affecting the quality.”

From Carl Icahn to Barry Rosenstein, activists are in love with spinoffs as a way of unlocking stock market value. At the moment, they’re not working. Emerson Electric Co. and RR Donnelley & Sons Co. are among American stocks that have declined an average of 1.1 percent in the month after announcing the actions this year — the first negative return for that group since 2007, according to data compiled by Bloomberg. Companies from Chemours Co. to Talen Energy Corp. that have been carved out of corporate parents and handed to shareholders as separate securities are down 2.3 percent in 2015, trailing the Standard & Poor’s 500 Index. Now, investors are…

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