Spinoff stocks and the stock of the parent company that separates off a portion of its business have both generally done well after the spinoff, but the spin-off stocks as a group have done better.

Is that always true?  No.

Why?  Well, why is almost always easier to tell in retrospect, but the reason for the stock spin-off should give some clues.   For example, look at what LRAD President Tom Brown said about why they are spinning off their HSS division as Parametric Sound in an LRAD company press release.

“When Company founder and the inventor of  HSS, Elwood G. Norris, approached the board of directors earlier this year regarding spinning off HSS through a tax free distribution, we viewed it as the best opportunity to create shareholder value for a business that has historically contributed significant losses to the Company’s operating results and contributed less than 5% to our total business revenues through the fiscal nine months ended June 30, 2010,” remarked Tom Brown, president and CEO of LRAD Corporation.

Sounds like they’re figuring that they’ve got a good thing going with the sound systems, but that’s being held back with the focused listening systems.

Will Parametric Sound find a way to start making money and eventually outperform the parent?  Who knows?  I certainly don’t.  That will be in the public record soon enough.

Maybe the best bet for those who do find themselves in possession of Parametric Sound shares will be that a larger company has a need for their technology and buys the whole company.

For right now though, if this is a situation that interests you, the parent is probably the more likely bet.

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

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