Forbes - Why Every Good Stock Market Investor Needs A Breakup
Mar 9, 2023
Divorces, as anyone who has been through one (and I haven’t) will tell you, are expensive. Ask Jeff Bezos. In 2019, Jeff and MacKenzie finalized their separation, which, at roughly $160 billion, set a financial world record that will be difficult to beat. Were they better staying together or are they freed up to realize their real true potential apart? Time will tell, I guess.
The structure of human relationships and breakups is something I’m not really an expert on. However, what I have done for over 17 years is to examine corporate divorces – when companies go through a separation of businesses and, more specifically, figure out whether the entities are better off together or not. If not, where is the real value and how can an investor capitalize on the opportunity? Call me the best company divorce lawyer in town if you like, but analyzing these regular key events is something you should consider as an investor as these “Special Situations” can create enormous wealth for you if analyzed correctly.
Corporate breakups, more commonly known as Spinoffs, demergers, or divestitures, are the equivalent of a divorce as we know it, but on the company side. A stock Spinoff is a corporate action whereby a company separates a portion of its business into a new independent company and distributes shares of the new company to its existing shareholders. This is usually done to unlock the value of the business unit, allow it to operate more independently, or to focus on the core business.