In a terse stock spin-off announcement on January 28, 2010, Abraxis Bioscience (ABII) said that it would be spinning off Abraxis Health some time this year.  It was one of those statements that say everything and nothing, and leave you wondering what’s really going on.  Sort of like saying that the CFO is departing to “spend more time with his family”.

Here’s what they said:

“By spinning off Abraxis Health as an independent, stand-alone company, we believe we will enhance the intrinsic value of both companies by allowing each company to pursue its differing drug development and commercialization strategies,” said Patrick Soon-Shiong, M.D., Executive Chairman of Abraxis BioScience. “We also believe the spin-off will facilitate each company pursuing the most attractive long-term growth opportunities and business strategies, thereby maximizing shareholder value.”

Maximizing shareholder value is always good and we know the part about the separate units being able to pursue their own strategies.  But, is it a good deal for shareholders of the parent, the spin-off stock, or perhaps both?  Unlike the CFO leaving for more time with his family, we will be finding out.  The mandatory information that the company will be filing with the SEC will see to that. -

Now we just have to wait for those SEC filings and set aside the time to read them.   Then we can decide for ourselves whether there is indeed shareholder value in this or not.

Tags: ABII, Abraxis Bioscience, Abraxis Health

Encana spin-off Cenovus, CVE, closed today with its price at the lowest level that it has been since the stock spin-off, 41 days ago by my count.  Where is the “drop-right-after-the-spin-off-and-then head-higher” pattern that we’re looking for when we need it?

The often quoted studies on spin-off investing used stock price two years after the spin-off for their calculations and if my memory serves me correctly they found that most of it came in the second year.  Which brings up a significant psychological factor in making any trading plan work, which is how one sticks to the plan without getting thrown off by activity between getting in and when the plan calls for you to get out.

Where Cenovus will go from here is anyone’s guess.  Spin-off stocks tend to outperform.  Which is a way of saying that on the whole, spin-off stocks go up, but any particular one may or may not.

One thing is for sure and that is that when you don’t stick to your trading plan, whatever it is, you are at risk of getting caught on the wrong side of  the trade coming and going.

What does your trading plan call for here?  Do you get out on the new low?  If so, is it the end of the trade or will you re-enter?  Under what circumstances?  Or, have you decided that your exit will be two years after the spin-off?  Perhaps, you view the spin-off as having a positive bias and you will trade it long.

Whatever you decided when you got in, now is not the time to decide to throw the plan out the window and wing it.

Tags: Cenovus, CVE, spin-off stock, stock spin-off

You have been provided with a list of stock spin-offs to be completed in 2010 courtesy of The Spinoff Report.  If you want to go further than the list and partake of their expertise, you can go to their website and subscribe to their service.  They do a very complete job and if your involvement in this area is big enough to justify their fee, it certainly is something worth looking into.

For the rest of us, whether we can afford the top tier advisory service or not, stock spin-offs remain an excellent corner of the market in which to be looking for positions that meet our personal criteria.  Of course this presupposes that you have personal criteria that must be met before you enter any position, no matter how likely success may be in any particular group of stocks.

You likely will not generate as complete an analysis as TSR does, but that may be counterbalanced by putting in the time yourself.

Tags: stock spin-off