Dow Jones soars above 23,000. Is it too stretched? >>> READ MORE

Abbott Labs Worth Less Than Its Spinoff

'AbbVie' valued at $55.3 billion, more than ABT's $47.9 billion


Abbott Laboratories NYSE:ABTBecause of aggressive acquisitions over the years, Abbott Laboratories (NYSE:ABT) has really become two companies — a drug operator and a diversified health care firm (with diagnostic systems, medical devices and nutritional products). So, to unlock more shareholder value, the company is in the process of a spinoff.

In fact, Wall Street is already making a big valuation adjustment. The drug company — named AbbVie, which is being traded on a “when issued” basis — has a market cap of $55.3 billion, which actually is bigger than the parent company’s $47.9 billion.

Investors generally like to invest in companies that have a singular focus; it makes the analysis much easier and also means management has fewer distractions.

And yes, spinoffs often have been good for investors. A notable example is Marathon Oil (NYSE:MRO), which spun off its refining division, Marathon Petroleum (NYSE:MPC) back in June 2011. Since then, shares have ripped off 85% gains, making it one of the year’s top stocks to date.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”  Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC