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

Arvin Meritor (ARM) says that it is re-thinking its previously announced stock spin-off of its car parts unit and cutting jobs in light of its projections of future business conditions.

Seems like a sane thing to do given not only the level of current economic slowing down and uncertainty.

Any investing model is based on assumptions about how prices of securities are arrived at.  In times like these when the  rules of the game seem to be in flux,  maybe  to eventually settle down and go on more or less as before or maybe to change significantly, perhaps it is best to stay alert, watch and wait.  This goes for individual companies as well as for us.

The real trick, it seems to me, is to not “go to sleep at the switch” and miss the signs that a new trend is shaping up while trying to not get impulsive.

I believe it was Gerald Loeb who said many years ago that for us investors that it is not just fear and greed that push us into bad decisions, but also impatience.

Staying patient and awake.  That is the challenge now.

Tags: ARM, Arvin Meritor, fear, greed, impatience, spin off, spin-off stocks, stock spin-off

Now we know that Encana intends to call its oil sands unit spin-off Cenovus.  We know what to call it, (though I haven’t heard what the ticker symbol will be.)  That just leaves us to try to figure out whether this is a good deal for us or not.

Generally, getting the oil out of the sand and refining it into a usable product depends on high oil prices.  It’s an expensive process.  The oil is there and they know how to get it, but they need someone to be willing to pay enough for it to make the whole thing profitable.

Right now the price of oil is trending in the wrong direction for this source to be profitable.  Will the price of oil reverse itself enough to make this a good investment?  Eventually to be sure, but when?

Perhaps from the point of view of one seeking value in a spin-off situation, the closer the price of oil edges toward oil sands extraction costs, the better a long term value this new company Cenovus will turn out to be.

Tags: Cenovus, ECA, Encana, spin off

Apparently, when the going gets tough and businesses are trying to figure out how to make it to the other side of the crisis without going out of business, a spin off of something is often somewhere in the plan. Lehman was going to do it with real estate mortgages, Altria with cigarettes, AIG with its aircraft leasing unit, and now here comes GE with some part of all the financing they do.

It makes sense really to sequester the unknown and potentially toxic parts of the enterprise and not let them sink the whole operation. The question for us is, how is the spun off portion valued by the market. In this environment it would not be surprising at all to have people not want to touch this kind of stuff with a ten foot pole.

You can find a very detailed look at what might affect a GE spin off plan, take a look at the BoomBust Blog.

Tags: GE, spin off

The Brinks Company, BCO, famous for its armored trucks that carry cash around for banks, business, and the like, has announced that it will spin off its home security unit. Brinks shareholders as of October 21, 2008, will receive one share of the new company, Brinks Home Security Holdings, for each share of Brinks.

Brinks Home Security Holdings is applying to trade under the symbol CFL. So far the logic of choosing that symbol has not been divulged, nor has the registration statement been filed, but they assure us that is all in process.

It will be interesting to see how the two parts divide out. Not that “home” anything feels too appetizing just now, but perhaps management will illuminate us on how this might be a real opportunity in the form 10.

Tags: BCO, Brinks, spin off