In this article, we will take a look at the 13 spin-off companies in 2023. To see more such companies, go directly to 5 Spin-off Companies in 2023.
After seeing a rapid decline immediately after the pandemic, spin-offs started to gain popularity again. The total global volume of completed spin-offs jumped to $203 billion in 2021, compared with $95 billion in 2020 and $179 billion in 2019. An interesting report by Wachtell, Lipton, Rosen & Katz takes a look at the reasons behind spin-offs. The report said that shareholder activism and push from activist funds is one of the biggest reasons behind spin-offs. The report said that as of the end of December 2021, “12% of global M&A activism called for break-ups or divestitures – lower than 2019 and 2020, but higher than 2017 and 2018.”
What is the Benefit of Investing in Spin-Off Companies?
Spin-offs are deemed as value maximizers and data has shown that spin-off companies do well. A research paper by academics sees some data that analyzes the possible benefits and cons of investing in spin-off companies and parent companies of newly independent companies. The paper quotes research from McConnell and Ovtchinnikov. This research analyzes parents and spun-off subsidiaries for which data are available for the years 1965 to 2000.
This study measured performance of two benchmarks over the 36 months following spin-offs and found that spun-off companies’ shares outperform benchmarks over the first 22 months following the spin-off and trade in line with the benchmark thereafter. The study also found that the parent companies’ shares also outperform their benchmarks by an impressive margin “but the pattern is slightly different for parents that outperform the benchmarks over the first 15 months following the spin-offs and then level off.” Based on this data, the research paper deduces that it’s best to buy shares of newly spun-off companies “as soon as they become available” and hold them for 22 months. In addition to this, it’s also advised by the report based on the above research to buy shares of parents of newly spun-off companies and hold them for 15 months.
The report also mentions some important spin-off events triggered by hedge fund activist investor activity. It’s important to note that whenever an activist hedge fund pushed a company for a spin-off, in many cases the parent company’s stock jumped as investors deem possible spin-offs as a positive sign.
“Evidence of the interest in spin-offs as a desirable corporate undertaking is not difficult to find. For example, in May 2012, Trian Fund (under the direction of co-founder and activist investor Nelson Peltz) acquired a 7.1% ownership position in Ingersoll Rand. The fund immediately called for management to restructure certain of the company’s business units ( Jones, Chon, and Benoit [2012]). On that day, company shares increased by 5.4%. In December of the same year, after initial resistance, the company announced its intent to spin-off Allegion, its commercial and home security division. Other activist investors have recently followed similar strategies. During January 2014, Carl Icahn acquired a 0.82% stake in eBay for roughly $625 million, and immediately called for management to spin off the company’s PayPal holdings (Bensinger [2014]). In the same month, Third Point took a $1 billion position in Dow Chemical and urged the firm to spin off its petrochemical unit (Herbst-Baylis and Scheyder [2014]). And in July 2014, Elliott Management acquired a 2% stake, valued at over $1 billion, in EMC Corp and urged the company to spin off VMware.”
The report also says that spin-off activity tend to increase during periods of robust stock market performance. It mentions data according to which spin-off activity saw two peaks during the period between 2001 and 2012. During these two peak years (2002 and 2008), spin-off activity touched its peak. This peak was the result of a solid stock market activity. But when the markets decline, spin-off activity abates. The report said:
“Not coincidentally, the S&P 500 index achieved relative peaks during the prior 12 to 18 months, reaching a relative peak of 1,517.68 in August 2000 and another relative peak of 1,549.38 in October 2007. Those peaks were followed by severe stock market dips and significant declines in spin-off activity, with only 10 events in 2003 and just six in 2009.”
Pixabay/Public Domain
Our Methodology
For this article we used stock screeners and manual research to identify spun-off companies in 2023. We only picked spin-offs completed in 2023. We did not talk about companies that are set to be spun-off in the late half of 2023 or 2024.
Spinoff Companies in 2023
13. PHINIA Inc. (NYSE:PHIN)
Number of Hedge Fund Holders: N/A
US-based automotive supplier BorgWarner Inc. (NYSE:BWA) earlier this year completed its spin-off of Fuel Systems and Aftermarket segments into a separate, publicly-traded company named PHINIA Inc. (NYSE:PHIN).
PHINIA Inc. (NYSE:PHIN) last month announced a quarterly dividend of $0.25 per share. Dividend yield came in at 3.73%. The dividend is payable September 22 for shareholders of record as of September 12.
12. Toro Corp. (NASDAQ:TORO)
Number of Hedge Fund Holders: 1
Shipping company Castor Maritime (NASDAQ:CTRM) completed its spinoff of Toro Corp. (NASDAQ:TORO) earlier this year. Recently Toro Corp. (NASDAQ:TORO) posted second quarter results. GAAP EPS in the second quarter came in at $0.92. Revenue in the period fell 3.5% year over year to $24.9 million.
11. Star Holdings (NasdaqGM:STHO)
In March this year, Safehold Inc. (NYSE:SAFE) closed its merger of iStar Inc. Before the merger iStar completed the separation of its legacy assets and certain other assets through the distribution of all of the common shares of Star Holdings (NASDAQ: STHO) to holders of record of iStar common stock as of the close of business on March 27, 2023 in a spin-off transaction.
Last month Goldman Sachs started covering Safehold (NYSE:SAFE) with a Buy rating as the firm believes the stock has opportunities when interest rates pressures will subside.
“Over time, as restructuring activity picks up in the near term, and as refinancing and transaction activity recovers over the medium term, we expect SAFE’s earnings and value growth will be driven by investment volumes, and yield,” Goldman Sachs’s Caitlin Burrows said.
10. C3is Inc. (NASDAQ:CISS)
Number of Hedge Fund Holders: 1
Imperial Petroleum provides seaborne transportation services for energy companies. Earlier this year the company completed the spin-off of its previously wholly-owned subsidiary, C3is Inc. (NASDAQ:CISS), the holding company for two dry-bulk carriers, effective June 21, 2023.
Earlier this month the company posted first-half results. Revenue in the period came in at $4.9 million for the six months period ended June 30, 2023 corresponding to daily TCE1 of $12,145.
9. Fortrea Holdings Inc. (NASDAQ:FTRE)
Number of Hedge Fund Holders: 3
In July, laboratory services company Labcorp (NYSE:LH) completed its spin-off of Fortrea Holdings Inc. (NASDAQ:FTRE). Last month Barclays started covering Fortrea (NASDAQ:FTRE) with an Equal Weight rating. The firm said Fortrea Holdings Inc. (NASDAQ:FTRE) has “plenty of room” for expansion and topline acceleration in 2024-2025.
8. Atlanta Braves Holdings, Inc. (NASDAQ:BATRA)
Number of Hedge Fund Holders: 10
Liberty Media Corp (NASDAQ:LMCA) in July completed the split-off of Atlanta Braves Holdings, Inc. (NASDAQ:BATRA).
7. Vitesse Energy, Inc. (NYSE:VTS)
Number of Hedge Fund Holders: 15
Jefferies Financial (NYSE:JEF) earlier this year completed the spinoff of Vitesse Energy, Inc. (NYSE:VTS) as an independent company. Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) sold its stake in the company during the second quarter.
In July Vitesse Energy, Inc. (NYSE:VTS) posted second quarter results. Net income in the quarter came in at $9.6 million. Revenue in the quarter fell 34.5% year over year to $51.59 million, missing estimates by $7.31 million.
6. Sealsq Corp (NASDAQ:LAES)
Number of Hedge Fund Holders: 1
Cybersec and IoT solutions company WISeKey International in Mach said the SEC had declared effective its S1 form for the partial spin-off of SEALSQ, which was its subsidiary for its semiconductor business.
Click to continue reading and see 5 Spin-off Companies in 2023.
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Disclosure: None. 13 Spin-off Companies in 2023 is originally published on Insider Monkey.
