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This seems like a perfect example of a company that is too focused on what Wall Street thinks and not being able to deal with the bigger picture and plan for th

This seems like a perfect example of a company that is too focused on what Wall Street thinks and not being able to deal with the bigger picture and plan for the long term.

talmand 15y ago
I disagree, I think they had a long-term goal in mind without considering the short-term consequences. I'm not a Wall Street guy and I could have told them their stock would tumble immediately. Why? That's easy, if you split off a significant amount of your business to a second company then the company is worth less the exact amount you are splitting off. For example, $200 million company splits off $75 million of its company to a second company. Original company is now worth $125 million instantly. Wall Street does not react well to that unless you can show such exponential growth that you'll make it up in a quarter or two. With their stock tumbling because of the price hike then anyone with any common sense would have known that this would increase the speed of the fall. In fact, the conspiracy theorist in me suggests that this was pushed in an effort to build cash by shorting the stock.
- SoftwareMaven 15y ago
  That's not true. If company A is worth $200M and you split it, (assuming no other factors liked pissed off investors and/or customers) you'll have company A worth $125M and company B worth $75M. There is no reduction in the value of the companies. Investors get five shares in A and three shares in B for every eight shares they held. The problem here is everybody (customers, investors and pundits) thought it was a horrible idea. They thought the value of two separate companies was half the value of a single company. That is not the normal path when a company spins off a piece of itself.
  - talmand 15y ago
    Well, I would say that a value change of $200 million to $125 million is a reduction. Although I didn't assume that investors would automatically get shares in the new company to equal the value they lose in the original company. It's nice if it works out that way but I just don't assume that kind of thing.

This seems like a perfect example of a company that is too focused on what Wall Street thinks and not being able to deal with the bigger picture and plan for the long term.

talmand 15y ago

I disagree, I think they had a long-term goal in mind without considering the short-term consequences. I'm not a Wall Street guy and I could have told them their stock would tumble immediately. Why? That's easy, if you split off a significant amount of your business to a second company then the company is worth less the exact amount you are splitting off. For example, $200 million company splits off $75 million of its company to a second company. Original company is now worth $125 million instantly. Wall Street does not react well to that unless you can show such exponential growth that you'll make it up in a quarter or two. With their stock tumbling because of the price hike then anyone with any common sense would have known that this would increase the speed of the fall. In fact, the conspiracy theorist in me suggests that this was pushed in an effort to build cash by shorting the stock.

SoftwareMaven 15y ago
That's not true. If company A is worth $200M and you split it, (assuming no other factors liked pissed off investors and/or customers) you'll have company A worth $125M and company B worth $75M. There is no reduction in the value of the companies. Investors get five shares in A and three shares in B for every eight shares they held. The problem here is everybody (customers, investors and pundits) thought it was a horrible idea. They thought the value of two separate companies was half the value of a single company. That is not the normal path when a company spins off a piece of itself.
- talmand 15y ago
  Well, I would say that a value change of $200 million to $125 million is a reduction. Although I didn't assume that investors would automatically get shares in the new company to equal the value they lose in the original company. It's nice if it works out that way but I just don't assume that kind of thing.