What's so good about a spinoff?
Let's look at this scenario from the point of view of the stockholders, not the point of view of the new managers of the spinoff.
What's a fair value for IDX right now? $15?
Let's say that Grant Evans and crew decide to leave live scan and ANADAC behind, while they go conquer the world in an Identicator-type IPO. We shareholders get to keep all of old IDX, which won't even have Fowler's pretensions about bio-authentication. In other words, it will be a version of DBII with some other government contracting work thrown in. Maybe it could be worth $5 a share.
Meanwhile, we would get a minority interest in Identixicator. Say, 25% for present shareholders, 25% for the new management, and 50% raised from venture capitalists, the public, etc. Using my totally arbitrary arithmetic, the new Identixicator would have to be at $40 per share ($1.2B market cap) for my IDX stock to be at the $15 fair value. I suppose it could happen.
But why spin it off? Keep it. I don't want to be diluted by 75% (or whatever) in the enterprise that has the chance of making all the money! If you need more money for Identix, do a secondary. If they could raise $100M (let's say, at $10 per share), I'm still diluted less than in a spinoff . . . since a 40M share company that has a $1.2B IT division and another $5/share DBII/ANADAC side would yield a share price of $35 on the same valuations.
My numbers are all made up, but as long as venture capitalists and new Identixicator management grab a large chunk of any spinoff IPO, my basic point is intact -- this scheme would maximize stockholder dilution. If I were interested in that I would invest in NRID/ESAF.
Your post practically says, "Come and rob me." |
