The Great American Outdoors? Smith & Wesson Spinoff Of American Outdoors Set for August 24th

Smith & Wesson (SWBI) announced the final details of the tax free spinoff of its outdoors and accessories business, American Outdoor Brands. The transaction was approved by its board of directors and on August 24th, shareholders as of August 10th will receive one share of American Outdoors for every four shares of Smith & Wesson owned. The new company is expected to trade on the NASDAQ under the ticker ‘AOUT’, while Smith & Wesson will retain its current ‘SWBI’ ticker. No index changes have been announced yet, but we will provide an update if any are set to occur as a result of the transaction.

For those who can’t wait to get in on the action, a When-Issued market is expected to be available beginning on or around August 10th:

Beginning on or about August 10, 2020 up to and including the distribution date, it is expected that there will be two ways to trade Smith & Wesson Brands common stock – either with or without the distribution of American Outdoor Brands common stock:

  • A ‘regular way’ market (NASDAQ: SWBI) in which shares of Smith & Wesson Brands common stock will trade with an entitlement to receive shares of American Outdoor Brands common stock on the distribution date; and
  • An ‘ex-distribution’ market (NASDAQ: SWBIV) in which shares of Smith & Wesson Brands common stock will trade without an entitlement to receive shares of American Outdoor Brands common stock on the distribution date.

Smith & Wesson Brands expects that a “when-issued” public trading market for American Outdoor Brands common stock will commence on or about August 10, 2020 under the symbol “AOUTV,” and will continue up to and including the distribution date.  Beginning on the day following the distribution date, all shares of Smith & Wesson Brands common stock and American Outdoor Brands common stock will be separately traded only on a “regular way” market.

Although it may end up creating some small positions, this is a pretty easy ratio to work with. For example, a shareholder with 100 SWBI shares on August 10th will end up with 100 SWBI AND 25 AOUT shares on the distribution date.

Smith & Wesson will retain the firearms business and the Inelegant Investor noted in an earlier piece that it is hard to be bullish on the company long term. Although FBI background checks are booming right now and signalling a surge in gun sales, the existential risks facing these companies are real. Remington just filed for Chapter 11 for the second time in the past three years as it fights numerous legal battles and a heavy debt load. Although its issues are idiosyncratic, they do show the potential for litigation to cripple these companies.

Disclosure: Author holds no position in any stock mentioned.

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