The city of Baltimore has its new largest publicly traded company as of today. Constellation Energy (NASDAQ:CEG) has officially split from industry giant Exelon (NASDAQ:EXC). So far, the spinoff has only helped both CEG stock and EXC stock. Both companies are trading well, though it may be due to external factors.
So what else do you need to know? Exelon announced last year that it was splitting up its holdings in the power and utility space. The company said this would allow it to properly utilize each of its enterprises.
Now, that logic is getting put to the test as Constellation Energy starts trading as a standalone firm.
What’s Happening With CEG Stock
Constellation is enjoying its first day of trading, up 8% for the day.
Things didn’t start off so well for Exelon. The energy conglomerate started the day among the top pre-market losers, falling by more than 27%. Since then, however, it has rebounded nicely and is back in the green. EXC stock is currently up 3%.
Why It Matters
Executing a spinoff can be tricky business. This was a good time for Constellation Energy to become its own company, though.
Industry demand is strong enough to keep both stocks elevated as the companies adjust. The oil boom has been raging since before 2022 began, but now a new factor is helping the energy sector. With chilling temperatures looming, natural gas prices are skyrocketing as states brace for a heating crisis. This type of demand is great for companies in the natural gas space, such as Constellation Energy. CEG stock is likely to keep rising for as long as the cold weather threat drives up natural gas prices.
Exelon also still has holdings in the natural gas space, such as Delmarva Power. Although it fell this morning amid news of the spinoff, that type of development is common for companies whose holdings are being reduced.
What It Means
Constellation’s recent story, though, should remind us of the power of timing. It became a standalone company at a time when demand for one of its primary products was sky high. When the split was first announced, Exelon officials stated that it would give both companies the “financial and strategic independence to focus on its specific customer needs.” It has done exactly that, at a time when customer needs have never been more abundant. CEG stock is well-positioned to emerge as a clear winner of the energy crisis.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
