Johnson & Johnson’s decision to hold a traditional IPO for its consumer health unit raised some eyebrows on Wall Street due to the moribund new issues market, but analysts say it makes sense when viewed as part of a two-step process. Shares of J&J are down 2.5% since the company filed for an initial public offering of Kenvue Inc. on Jan. 4 after the market closed. The announcement was welcome news for New York’s IPO market, which is coming off its lightest year in decades partly due to a preference for tax-free separations by companies navigating the impact of macroeconomic headwinds.

An IPO will enable J&J to get the highest possible price while it also plans a future tax-free distribution of its remaining shares, analysts at The Edge Consulting Group wrote in a note to clients.

Traders have punished traditional IPOs during the past year’s stock-market selloff, forcing most candidates to wait for lower volatility and a more certain interest-rate outlook. Just five IPOs raised more than $500 million apiece in the past 12 months, and four of those stocks trade below their offering prices. Spinoffs, on the other hand, have outperformed. The Bloomberg US Spin-Off Index is down 7.8% over the past year compared with a 17% decline in the S&P 500.

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