One of the more interesting moves in today’s market comes from recent spinoff Kenvue (NYSE:KVUE). Currently, shares of KVUE stock are down around 3% in today’s session, as the company reported earnings that beat Wall Street estimates by a rather wide margin. The company posted strong demand and raised its earnings expectations for 2023 to between $1.26 and $1.31, well above analyst expectations of $1.23 for the full year.
However, the dip in KVUE stock (which was a double-digit decline at one point in the session) came as former parent Johnson & Johnson (NYSE:JNJ) announced it would tender an offer to sell off its remaining stake in the company, potentially in the next few days.
This offer wasn’t expected for some time, hence the turmoil in KVUE stock today. Let’s dive into what investors may want to make of this move right now.
KVUE Stock Dips, Despite Strong Earnings
Johnson & Johnson still holds a considerable amount of KVUE stock (estimated to be around 90% of the company), so a tender offer for the rest of the company could invite some serious volatility. As most investors know, the market detests uncertainty. And with the demand picture unclear for Kenvue’s upcoming offering unclear, such uncertainty is leading to front-loaded volatility today.
It was sideline expected that there would be a six-month reprieve from any tender offer, given the 180-day lockup following Kenvue’s IPO in May. Thus, the shock value of this announcement today is evident, as investors remain unclear about where KVUE stock will settle when all the selling is done.
Indeed, it appears as though Johnson & Johnson’s management team wants to capitalize on Kenvue’s strong earnings. Tendering its shares at an opportune time is prudent. However, as with any tender offer, gauging demand for these shares is an exercise that’s difficult to carry out. Today’s move suggests that, despite these strong earnings, the ability for investors to gobble up tens of billions of dollars of stock may not be there.
On the date of publication, Chris MacDonald 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.
