Stock Spin-Offs

LRAD Corporation, symbol: LRAD, has announced that September 10, 2010, is the record date of its tax-free stock spinoff of its HSS business.

Just in case you have not heard of either (I hadn’t),  here’s how the company describes itself on its website :

“LRAD Corporation’s Long Range Acoustic Device® (LRAD®) directional sound systems are being used around the world in diverse applications including, fixed and mobile military deployments, maritime security, critical infrastructure and perimeter security, commercial security, border and port security, law enforcement and emergency responder communications, and wildlife preservation and control. ”

You can read more about it on the company website, but appears that they make very loud, highly focused bullhorns and a product called HSS which is a very sensitive, highly focused microphone.

Does this stock spinoff make sense?   . . . for the company?   . . .  for potential investors in the parent or the spin-off stock?  I can’t tell.   The company is pretty much “under the radar” when it comes to analyst opinions.

It does seem a bit odd for a company whose stock sells for around $1 a share to be wanting to split itself up.  On the other hand, if having the two product lines is really counter to long term growth of either component, then I guess it might.

At least when you’re trading in a stock this cheap, you can just make the entry price your stop and then sit back and watch.

Tags: HSS, LRAD, spin-off stock, stock spin-off

For those of you who have wanted a consistent and comprehensive source of information on stock spin-offs, but have found the professional services too pricey, there may be an option for you.  I say “may” because the new service from the Stock Spinoff Report people is still $99/mo., but if you play in a league where that is cheap, check it out.  It is called TSRlite.

Tags: stock spin-off

Tyco International, (TYC), announced in late April of this year that it would do a stock spin-off of its electrical & metal products business in 2011,  and we haven’t heard much if anything about it since.  Apparently, the number of pieces that have to come into place for a spin-off stock to actually come into existence is mind boggling.  It takes a lot of work, a lot of time, and there really isn’t anything for the company to say until they get it all in order to the satisfaction of the SEC.

This points up one of the difficult parts of stock spin-off investing, at least for those of us with ADD, and that is the grand pace at which these things proceed.  The themes of greed and fear have been beaten into the ground by anyone with anything to say about investing, but impatience and loss of focus really ought to be right in there with the big two.

You have to remember what you are watching and you have not resist the urge to try to “push the river”.  Each kind of trading has its own pace and flowing with that makes the different between success and failure in any particular style. When it comes to spin-off investing it sounds simple, and, I guess it is for those of you with the right temperament.  For the rest of us, watch lists and calendar alarms and taking a deep breath and waiting for the trade to come to us are vital.

So, keep your eye on Tyco’s upcoming spin-off.  We won’t be able to assess its potential until they give us some data on what they are going to do.  If that looks good, then we can wait to get confirmation from price and volume.

Tyco Describes Itself As: ” a diversified, global company that provides vital products and services to customers in more than 60 countries. With more than 100,000 employees worldwide, Tyco is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products.”

Tags: impatience, spin-off stock, stock spin-off, TYC, tyco International

Even before spin-off stock of Babcock & Wilcox starts trading on the New Stock Exchange under its new ticker symbol, BWC,  the company is showing signs of what’s ahead with its recently announced alliance with Bechtel for small modular nuclear power plants,  (SMR=small modular reactor).

Babcock & Wilcox has been successfully putting nuclear reactors in demanding situations for years.  Their small modular reactors have kept the nuclear submarine and surface ships of the US Navy going  efficiently, safely, and largely unnoticed for decades.  Linking up with Bechtel to take this experience and skill out of the warships and out into the world certainly seems like a good idea on the surface of it.

For more details from someone who focuses on nuclear power generation issues, you might find this linked blog post on the Babcock & Wilcox/Bechtel Power venture.

As far as stock spin-off investing goes, we can only hope that most people don’t even know who Babcock & Wilcox are and what they do and only relate Bechtel to involvement in Boston’s “Big Dig”.  If that’s the case, with any luck they will bail out of BWC early, giving us a chance to get in at a good price.

We need every kilowatt we can scrape up in the future and when it comes to nuclear power generation, these two know what they are doing.

Tags: Babcock & Wilcox, Bechtel Power, nuclear power, spin-off stock, stock spin-off

To no one’s surprise, Frontier Communications, FTR, is down sharply on heavy volume after its stock spin-off from Verizon, VZ.    Actually, there must be someone who is surprised, but apparently they are part of a small group of Verizon shareholders who were backpacking in the wilderness or who get terribly bored thinking about money or something.

On my weekly charts I see that over the last 20 weeks FTR has had an average of  about 29 million shares change hands each week.  Last week the volume was 110,589 shares with the price opening the week at 7.56 and finishing Friday at 7.35.  Today by lunchtime on the East Coast today we’ve seen 27,332,000 shares change hands and the price is down nearly 5% at 7.01.

It  doesn’t take Jesse Livermore to detect the current trend in the spin-off stock here, but so what?  The question is always whether there is a workable opportunity in this action and if there is, how can we get on the profitable side of it?

Sooner or later this kind of thing usually gets over done, but in my limited experience, prices have an incredible ability to stay “too high” or “too low” for too long,  getting me too nervous and/or too financially stressed to hold on until the price comes back to “reality” (which is an odd choice of words since reality is clearly the price shown right on everyone’s screen at every moment.)

So, what to do?  For myself, (since as I mentioned in a previous post, my ADD won the day another time and I was amazed to find myself the proud owner of 12 shares of FTR,)  I am going to hold onto the shares received in the stock spin-off for their entertainment value if nothing else.

When and if I buy more FTR in the future will be determined by the trading plan that I put together some time ago far from the heat and confusion of the specific companies and businesses and business cycles.  Having tried to catch one falling knife too many, I find that having a plan and sticking to it is the only way I can stay sane and effective.

Tags: Frontier Communications, FTR, stock spin-off, stock spin-off investing, Verizon, VZ

Verizon’s (VZ) upcoming stock spin-off of Frontier, its landlines unit, is getting typical responses to the spin-off stock (dump it!) which can provide an opportunity for followers of spin-offs, but does it always?  Surely there are times when the contrarian idea that if everyone is doing, there must be money to be made by playing it in the other direction, is just plain wrong.

Still, even if they are exactly right given that their actions are predictable, is there an advantage to be gained from the odds that their correct actions are likely to be overdone?

Just asking.

Sounds like there may be a short term opportunity for the nimble.  What do you think?  How would you trade it?

7/2/2010  Oops!  Belated disclosure:  I got an electronic confirmation from an IRA that I rarely look at informing me that I have received shares in Frontier Communications as a result of the spin-off from Verizon which I had forgotten I owned.   For the record, I intend to keep the Frontier and may add to the position after other people who got notified that they now own a landline company that they never wanted sell it.

Tags: Frontier, spin-off stock, stock spin-off, Verizon, VZ

The  Vishay and Sunoco stock spin-offs have been written up on Philly.com.

When Joel Greenblatt noted that often the best information on a spin-off could be found in your local newspaper he wasn’t thinking about the effect of the internet, but the basic principle remains.

Though the first announcement and the conclusion will be found in the national news, it is on the local scene where people are directly affected by the jobs, the investments, and the personalities that the spin-off is more likely to stay news along the way.

Fortunately, it is easier than ever to get this point of view, even if you have no idea where Malvern is and aren’t even sure how to spell it.

As for me, I am still trying to figure out whether I want to be a silent partner of the Zandmans or not.

And, when it comes to coke, it has interested me ever since I learned that you don’t drink it from my best friend’s grandfather who still had scars on his face 40 years after he quit tending a coke oven.  But, is coke a good thing to be making and selling now?  We’ve got to figure that out before Sunoco sets Suncoke free.

As ever, we have plenty of time.  In fact, one of the hardest things about spin-off stock investing for me is to not have dozed off and missed the entry when everything finally lines up.  Maybe it’s a new model — stock spin-off investing as ADD therapy!?  No?  I guess not.

Tags: Suncoke, SUNOCO, Vishay Intertechnology, vishay precision group, VPS

Motorola, MOT, has been going to do a stock spin-off of its cell phone business for a long time.  Just do an internet search on  Motorola spin off and you’ll get an idea of how many sources have written about this.  Sometimes it’s the “money losing cellphone unit” and sometimes it isn’t money losing in the stories, but it has always sounded at least a bit questionable from a shareholder perspective.  Sure, Motorola may be stronger without its cellphone business, but if I own MOT now and they split it apart giving me both pieces, the deal is a wash.

But that’s all different now.   According to Daily Finance author Dawn Kawamota, it is going to be structured so that the deal makes sense from both sides.

Sounds OK.  Fortunately for me and you, these things play out at what could be described at a grand pace.  Stock spin-offs are not for those with a short attention span, (at least if you have a good system of electronic alerts set up to wake you at opportune moments.)

There will be plenty of press releases, news articles, and SEC filings before you have to decide what you may want to do.

It could be a great opportunity for all involved . . . or not.  We’ll see.

Tags: MOT, Motorola, stock spin-off, stock spin-off investing

“When Do Analysts Add Value? Evidence From Corporate Spinoffs” , an academic paper, was the result of viewing 1739 analyst reports on corporate stock spinoffs.

My first response was to think just how thankful I am that the authors of the paper read all those analyst reports and not me!  They did it and I don’t have to.  They deserve another step toward tenure.  Seriously.  Whew!

Their observation that even though analysts could add a lot of information about the prospects of the spun off company, they usually don’t was not much of a surprise.  Even with all of the SEC documents that are filed on pro forma financials and the information in previous filings on the part the new entity played in the whole company in the past, it is common for it to seem like it is a pretty empty corner of analysis and prediction.

Actually, I sort of hope they don’t spur the analysts to get into this area more, since that lack of interest and information has always seemed to be a source of the mis-pricing that can create value in a stock spin-off.  There are precious few of those now that computers and the internet are flooding us with more information than most of us can deal with anyway.

In any event, the online synopsis of the paper reads easily for an academic piece and is worth a look.

Tags: analysts reports on spin-offs, spin-off stock, stock spin-off, stock spin-off investing

Vishay,VSH, has finally given us specifics of what the Vishay Precision Group, VPG, spin-off is going to look like if things go as they hope.

It will -

• result in the complete separation of the two companies
• be accomplished through a pro rata dividend of the outstanding shares of VPG owned by Vishay
• have a target date of July 6, 2010, if all requirements are met in time
• provide 1 share of VPG for each 14 shares of VSH held
• have a holder of record date of 5:00 pm, June 25, 2010
• start trading of VPG WI (when issued) June 23, 2010.

The company’s press release described the two components of the spinoff as follows:

“About Vishay Precision Group

Vishay Precision Group is a leading designer, manufacturer and marketer of Foil Technology Products (strain gages, ultra-precision foil resistors, and current sensors) and Weighing Modules and Control Systems (transducers/load cells, instruments, weigh modules, and control systems) for a wide variety of applications.”

“About Vishay Intertechnology

Vishay Intertechnology, Inc., a Fortune 1,000 Company listed on the NYSE (VSH), is one of the world’s largest manufacturers of discrete semiconductors (diodes, rectifiers, transistors, and optoelectronics and selected ICs) and passive electronic components (resistors, capacitors, inductors, sensors, and transducers). These components are used in virtually all types of electronic devices and equipment, in the industrial, computing, automotive, consumer, telecommunications, military, aerospace, and medical markets. Its product innovations, successful acquisition strategy, and ability to provide “one-stop shop” service have made Vishay a global industry leader. Vishay can be found on the Internet at http://www.vishay.com.”

There are still plenty of questions about whether this will be a good deal for investors or not.  At this point all I know is that it is a complete spin off, the two parts do seem to do different things, and the price/volume action after the stock spin-off will be there for everyone to see.  Right now my bias is positive, but I am going to be waiting for confirmation of that belief, both fundamental and technical.

People, with more knowledge of the industry and the company than I,  have voiced concerns that I take seriously.  I just don’t know what to do with the information other than to stay cautiously optimistic and be very alert for the issues in question affecting the deal and the companies’ performance going forward.

Tags: spin-off stock, stock spin-off, Vishay Intertechnology, vishay precision group, VPG, VSH