10 Rules for Spin-off Success

I’ve been investing in spin-offs for the past 15 years and have learned many lessons.

How’d I learn them?

Mainly, the hard way!

But today I’m sharing those lessons so you don’t have to make the same mistakes.

#1. Forget that “spin-offs outperform” 

In aggregate, they generally will but each situation is unique. If you go in thinking “spin-offs outperform” you will have a positive bias which will be costly.

#2. Look for “too good to be true” situations

In the spin-off world, there are many “too good to be true stories” that work out. Thungela Resources (TGA) trading at 2x free cash flow in July ’21, IAC Interactive (IAC) trading at a negative enterprise value (backing out MTCH and ANGI stake) just prior to the MTCH spin-off, and BBX Capital (BBXIA) trading at 50% of net cash post spin are just a few examples.

#3. Absolute value trumps relative value

Countless examples but just to name one: Vimeo (VMEO) looked cheap on a relative basis vs. other high growth SAAS names at $50 per share post spin.

On an absolute basis, not so much…