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The two companies would likely have more total value separate than together. The stock market doesn't price conglomerates correctly.
by CydeWeys 4y ago
The two companies would likely have more total value separate than together. The stock market doesn't price conglomerates correctly.
- crazygringo 4y agoCitation needed. When companies are split, sometimes they gain value and sometimes they lose it. There's no hard and fast rule, and I'm not aware of evidence of systematic downwards mispricing of conglomerates.
- Barrin92 4y ago>When companies are split, sometimes they gain value and sometimes they lose it Evidence suggests that spinoffs produce quite significant gains in shareholder value, here is one such study[1]. This isn't really that surprising as large conglomerates are slow, have managerial issues and are difficult to price and generally hold their best performers down. [1]https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1875857 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1875857
- mijamo 4y agoIt is the https://en.m.wikipedia.org/wiki/Conglomerate_discount https://en.m.wikipedia.org/wiki/Conglomerate_discount It is not mispricing, but it is a discount. Big companies, even very healthy ones, often split to satisfy their investors based on this phenomenon. It hasn't really played much in tech though which might be why you haven't heard of it, but is very very well known in industrial companies.