A Boom in Technology Public Company Spin Offs – Will Investors Get Dizzy?
- Dec 8, 2014
- Marc Fogarty
A new trend popping up in public companies is the spinning off of their technology products to become two publicly traded companies. Within a short period of time this fall, eBay announced a spin-off of PayPal, Symantec publicized a planned split of their security and information divisions and Hewlett-Packard announced a spin-off of its personal computer and printer business.
So what’s up with all the breakups, and is breaking up a good thing? With technology changing so rapidly and divisions within a business wishing to pursue their own direction, from my perspective, this seems to be a natural progression.
By spinning off and becoming two distinct companies, leaders of each part of the original company now have the flexibility to better compete within their specific market and each have the ability to show individual profit to further their appeal to investors. From an investor perspective, someone might like the idea of just buying stock in the one part of a company that seems to be doing better than the other, or they may have more confidence in that technology sector as a whole.
For example, PayPal’s IPO was in 2002, and they were acquired by eBay soon after. At the time, the two products worked hand-in-hand, and it may have been a good business move to have both companies under one umbrella. Now, as the technology landscape has continued to quickly evolve, they could be worth more apart than together. PayPal as a separate publicly traded company could possibly compete with Apple’s new ApplePay product. This might give PayPal the ability to raise capital specifically for them which could make them more agile in maneuvering the digital payments market.
Only time will tell if breaking up is a good thing. In the meantime, it will give some publicity to the tech companies and should give investors plenty to consider.
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Marc Fogarty, Audit Partner and National Biotech Sector Leader, within Technology and Life Sciences Group, and member of the firm's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.
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