In the space of just over a week:
- Symantec announced that it would henceforth become two companies:
- “Symantec” – which will still be distributing annoying messages and dark threats about Norton Antivirus updates. It will keep the CEO, CFO and almost anyone important.
- “As Yet Unnamed” – will house Symantec’s “information management” unit, offering services such as backup, archiving and eDiscovery. Um… Like iCloud and OneDrive? My feeling – the unit is being spun off to die.
- Hewlett-Packard announced that it would henceforth become two companies:
- “HP” – which will make PCs and printers; and
- “Hewlett-Packard Enterprises” – to include “HP’s current server, storage, networking, software, services, and financing operating segments”. Which smacks of government contracts that HP has secured…
- eBay announced that it would henceforth become two companies:
- eBay-not-including-Paypal; and
All this demerging – all at once.
This kind of thing is interesting because it suggests that the financial world is filled with spin-doctoring and almost no reasonable explanations at all. The basic idea:
- Companies merge in order to deliver shareholder value (mostly by firing a lot of people to create economies of scale).
- Companies demerge in order to deliver shareholder value (mostly by firing a lot of people to create economies of scope).
Like explanations of the platinum price:
- Platinum prices go down because of oversupply.
- Platinum prices go down because of undersupply.
And explanations of the stock market:
- Prices go up because people are optimistic and greedy.
- Prices go up because people are anxious and afraid (yes, Robert Shiller – I’m a-talkin’ to you).
I guess I should point out that Corporate Finance teams will earn their fees either way; and executives will earn fun bonuses for completing a transaction regardless of the transaction.
But if pressed to be contrarian to my own contrariness, I’d say something like:
- Well, just after a crisis, companies go on buying sprees because companies are cheap.
- Then when the crisis is abating, companies sell some of the companies that they bought because companies are no longer cheap.
- And investment bankers are there to let you know when companies are cheap and when they are not cheap because that is their job.
- Just after a crisis, shareholders aren’t concerned about specific risks – they’re concerned about market risks and weathering the crisis.
- But a little while later once the market has recovered, they forget about market risks and start getting fussy about specific risks (like “I don’t want to have to buy eBay shares in order to earn Paypal profits – why can’t I just buy shares in Paypal?”).
- Enter Carl Icahn and his shareholder activism.
But it does make you wonder if we aren’t cresting a wave of asset prices?