what happen to the stock price?

Question

a company is composed with 5 divisions and is selling one of them. What's going to happen to the stock price

Answer 1

These other guys are right. It gets pretty complex. Consider this story from March of last year. GM spun off Delphi in 1999 and the creditor's committee wanted records dating back to 1997 because they think that GM split the sheets rather poorly, although GM publicly said they gave Delphi too much. Valuation is a tough thing to figure. Consider AT&T's divestiture a few decades ago. The parent figured that they had jettisoned everything but the good stuff. As it ended, their core businesses fizzled and one of the baby Bells, SBC (Southwestern Bell, as it was known then) bought the ailing parent and its cell phone (AT&T Wireless) company just before it crashed and burned. Lucent (a former AT&T company in its own right, Bell Labs) spun off its primary profitable enterprise early, Avaya, simply because they didn't want their primary enterprise's problems to spoil the profit potential of the only part that was working well.

The only time when spin offs are easy to compute is when a company buys another company, and keeps it separate until it then sells it. Citgo (former Cities Service) is owned by the Venezualan state oil company, but because of regulatory issues, and a lack of financial sophistication, as with Avaya, Citgo is run separately because the Venezualians (esp. Chavez) hasn't the means to pay off all the debt, so Citgo still has to keep its books clear because of creditors and the mass of financial resources in the U.S. that are within their reach. Bondholders could gut the company in a heartbeat if the socialist south american president wanted to bleed the company. Watch when a company buys another and it is reported that they "assume the debt" of the acquisition--the same happens when they divest. It gets pretty tricky to show which debt, and how much of it, belongs to the spin off or to the parent. The same thing for the assets after they've been together for a while. When Conoco and Phillips merged, it was pretty clear, in most places the original signs still stand to say whose station or refinery or production field was whose. Yet, they've also done some joint stuff and consolidated staff and operations, as should be expected. Splitting up again will have its easy parts, and some parts that will be pretty hard and in great dispute--and that is an easy one.

Answer 2

In some companies, the stock price will rise if the sold-off division was a money loser. Or, the stock price could sink if the sale wasn't in the company's best interest. Or if the sale indicates that the company is about to sell other divisions.

You need to know a lot more about the business to even begin to predict. And, even then, stock price can still go in an unexpected direction.

Answer 3

If that division, is operating at a loss, the sale will be a benefit to the company and the stock should go up
If the division is a very good profit maker, the sale will have to be for an inflated price, and the company must have a plan to use the proceeds to bring in better profits, or the stock will drop and the directors fired.

Answer 4

It completely depends on how the division being sold is performing. Your question does not have enough information in it to give a correct response.

Answer 5

They already did at present up 40 4 factors. Over the lengthy haul the finest inventory market always will upward thrust. in the couple of minutes period all bets are off. look on the graph of the total market over the years. united statesand downs always yet note the finest line steadily factors slowly upward!!!

Answer 6

Do your own homework... There are too many variables to tell you.