Despite a history and reputation for outperformance, not every spinoff turns into a winner. I know, shocking, right? In this week’s edition of Odds & Ends we look at a few situations where shareholders have not been rewarded for holding on:
- FTD Companies (FTD), the flower delivery company, recently warned that it was hovering on life support. The company needs to find a buyer or raise a bunch of cash in order to pay off over $200m in debt coming due June 1st. For a little refresher, FTD was a 2013 spinoff of United Online, a company which was acquired by B. Riley in 2016. In a recent SEC filing, FTD noted that ‘if we are not successful in our initiatives or do not have sufficient liquidity to fund our business activities, we may be forced to limit our business activities or be unable to continue as a going concern.’ Bleak. Apparently, Valentine’s Day, the company’s Black Friday, didn’t deliver enough love for FTD this year. More generally, FTD has struggled from heavy competition. Shares predictably plummeted on the news and the stock now trades for under $1. Overall, the company’s performance as an independent company has been poor and the chart shows a mostly downward trend since the spinoff.
- A quick update on a takeover situation for another long time underperforming spinoff (~-26% or so). Digital First Media is stepping up its pursuit for Gannett (GCI). One of GCI’s defenses was to cast aspersions on DFM’s financing capabilities. Sure, the offer seems like sweet premium, but can the hedge fund backed media company really deliver? Apparently Howard Marks’ Oaktree Capital Management is “highly confident” in Digital First’s ability to attain a debt financing package and submitted a letter stating as much. While that letter isn’t binding and according to Gannett was ‘highly conditional’, it does send a message to the markets. Gannett wasn’t impressed though and its unwillingness to share confidential information is hindering its ability to secure financing. Rumors abound that it is pursuing a tie up with a different media company such as Tribune Publishing (TPCO). DFM is not backing down from the public and even political pressure being brought against it, but will its efforts be enough? This continues to be a fun situation to observe.
Disclosure: Author holds no position in any stock mentioned.