Is LRAD Spinoff of Parametric Sound an Example of When It Makes Sense to Buy the Parent Company?
September 10th, 2010 by john | 1,138 Comments | Filed in Spin-0ff News, Spin-off InvestingSpinoff 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
