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Spin-off (Investment opportunity ?)

Investment opportunity (?)

The frequency of corporate spin-offs ebbs and flows with general economic activity. After a spin-off occurs, investors can invest separately in entities that were previously presented as a single investment opportunity. For active investors, the question...

Spin-off (ich glaub' >>> Ich spinne !)

...of whether to invest in one or both (or neither) of the separated entities ebbs and flows with spin-off market activity. Beginning in 1965 and ending in 2000, the evidence suggested that a strategy of investing in the spun-off subsidiaries and holding the shares for 22 months, while concurrently buying and holding the parents' shares for 15 months, would have yielded superior returns relative to riskadjusted benchmarks.

McConnell and Ovtchinnikov [2004] performed that study of
long-run returns following spin-offs:

Their study encompasses a comprehensive set of parents and spun-off subsidiaries for which data are available for the years 1965 to 2000. They measure performance against two benchmarks over the 36 months following spin-offs and report that spun-off subsidiaries' shares outperform both benchmarks over the first 22 months following the spin-off and trade in line with the benchmark thereafter.


study (.pdf)