Dark Side of the Street (Edition #1)
Upcoming Special Situations, Recent Insider Buying, and more!
“No company was too small, no detail too obscure, to pass through his sieve.”
- Alice Schroeder on Warren Buffett
Upcoming Special Situations
Colfax Corp (NYSE: CFX) is planning to spin off its fabrication technology business (ESAB Corporation) from its specialty medical technology businesses (this company will be renamed Enovis Corporation) via a reverse stock split. There will be a special meeting on Feb. 28th, 2022 to approve the transaction. In the initial press release announcing the spin off, Colfax noted that the separation would allow more focus on each company, capital structures tailored to each individual company in order to capitalize on growth opportunities, and more clarity for investors in order to evaluate each company individually.
Exelon Corporation (NASDAQ: EXC) is planning to spin off Constellation Energy Corporation and will trade on the NASDAQ under the ticker (NASDAQ: CEG). The transaction will be tax-free and Excelon shareholders will receive 1 share of CEG for every 3 shares of EXC owned. Constellation has filed a Form 10 with the SEC and had an ‘Analyst Day’ on Jan. 11th, 2022 (the slideshow for the call can be found here). Trading for CEG is expected to begin on Feb. 2nd, 2022. The corporate action will separate Exelon’s utility operating companies from their Generation division which is an electricity producer and retailer. The main reason for the spin off is to separate Constellation from the highly regulated utility industry. In their Form 10 filing Exelon noted the following:
“As a standalone company, the Company may be able to pursue investments or acquisitions in the competitive energy infrastructure space that Exelon’s current shareholders would not find attractive as it would increase Exelon’s exposure to non-regulated businesses.”
Recent Insider Buying
Insider Buying on Completed Spinoffs
Large Micro Cap Purchases
Source: OpenInsider.com
Top News of the Week
“Spinoffs Fared Poorly in 2021. What It Takes for These Stocks to Outperform” - By Andrew Bary of Barron’s
“Cornell says that there tends to be “outperformance six months to three years after distribution.” He says that it can take a year or two for management to get into a groove and get rewarded by investors.”
“VMware is a Cheap Play on Cloud Computing. Why One Analyst Turned Bullish” - By Eric J. Savitz of MarketWatch
“White’s thesis is that VMware has been quietly repositioning the company for an enterprise computing world dominated by the public cloud sector.”
“2022’s Emerging Macro Trend: Focus on Micro” - By Christoper Smart of Barron’s
Investment strategies for 2022 will require lots of pencil sharpening and tire-kicking to vet individual business models for their ability to grow and thrive amid these broader transformations.