It's a "Call Option" on Quantum Computing
And this just-announced breakup could unlock an 89% windfall ...
There’s something kinda special about the pop tune “Breaking Up Is Hard to Do.”
AllMusic describes it as "two minutes and sixteen seconds of pure pop magic.”
And between 1970 and 1975, it was a Top 40 hit three separate times — for three different artists.
But it’s singer/songwriter Neil Sedaka who made it his signature song. He recorded the tune twice: The first — in 1962, when it hit No. 1 on the Billboard Hot 100 chart — and again in 1975, when his slower version peaked at No. 8 for Billboard and No. 1 on the Easy Listening chart.
“Breaking up” may be hard to do … but it’s also highly profitable.
And not just in music.
In the corporate world, breaking up is also hard to do because it takes time, planning and often outside advice.
But corporate breakups — called spinoffs, demergers, carve-outs and split-ups, to name a few — are immensely profitable. Want proof?
S&P Global Market Intelligence found that spinoff companies — in the three-year stretch after the breakup — outperformed their industry peers by 22.08%. Think of it as a “bonus” where two more years of stock-market returns get bolted on.
Blue-chip consultant McKinsey & Co. found that companies involved in spinoffs see higher revenue growth and higher profitability once the deal is done.
Studies point to an additional bonus — with the spun-out/carved-out ventures ending up as takeover plays. McKinsey found that a third of spinoffs end up in a deal within three years; Strategy+Business put that number at 40% in that same time frame. And the dealmaking expert law firm Wachtell, Lipton, Rosen & Katz found that spinoff firms are 24% more likely than their peers to be snapped up within five years.
And, as Wealth Builders like us well know, buyouts are done at hefty “premiums” to a company’s trading price. S&P Global says buyout premiums have ranged from 20% to 40% (with an average of 37%). Business Valuation Resources’ Mergerstat Review said buyout premiums have averaged 35% to 45% for completed deals over the past decade. And, for smaller companies (market caps of under $100 million), premiums could be much, much higher — hitting 50% or more.
Yes, breaking up is hard … but profitable.
And they tend to come in “waves.” For instance, the antitrust-triggered breakup of the Bell telephone system — a 1984 split up that created eight “Baby Bells,” including AT&T Inc. (T) — ignited a wave of conglomerate breakups during that decade, says The Financial Times. The Great Financial Crisis of 2008 triggered another wave.
We’re seeing it again now with companies like General Electric (GE), 3M Co. (MMM) and W.K. Kellogg Co. (KLG) doing deals.
Folks who followed me here from Private Briefing — the newsletter I ran for more than a decade at another financial publisher — know I’m a big fan of spinoff stocks.
I love their “calculus” for building wealth.
Generally speaking, when a company splits itself into two or three pieces, you can do really in the years to come.
Think about it … when ONE single, ponderous company splits into
TWO smaller ventures … that newfound independence opens up new vistas — and new pathways to profit — since those new companies are:
More efficient.
More nimble.
More innovative — and more open to new ideas.
And more likely to have management teams whose interests are aligned with shareholders.
That’s why spinoffs are part of our “Special-Situation Portfolio” roster — a portfolio of 10 “special-situation” stocks we created for our SPC Premium family members.
We chose those stocks well. But there’s one “Super 10” stock that’s really got me stoked: It’s a spinoff play — with a “Quantum-Computing Kicker.”
And something just happened to bolster its allure.
I’m gonna tell you all about it … right now.