Tax -Free Spinoffs and CEO Confidence
I have written about tax-free spinoffs in recent weeks and pitched the idea to at least one large cap CEO. It is a good hypothetical question for investors to ask portfolio company CEOs: “Would you be willing to execute a tax-free spinoff to unlock value?”
If the CEO pushes back, it is probably because that CEO does not have confidence in the GM of the Business Unit to be spun out with respect to that GM being a public company CEO - and therefore a steward of the parent company’s capital (shares in the spinoff are allocated pro rata to shareholders of the parent company). It is a good litmus test to figure out what level of confidence your CEOs have in their senior team.