Peter, I never thought that EDS stock failed to get a reasonable valuation because it was a GM tracking stock for many years. In my opinion, the critical issue is whether the parent company is stable.
In addition, I have written several times on GZMO, which is NOT a value stock, that the performance of the tracking stock assets (owned by GENZ) is materially enhanced by the close ties to the parent company and the expertise it can bring to the table versus being a true independent company.
A pure, small biotech company benefits immensely from the manufacturing, regulatory, legal, financial and other resources available through the larger parent. For example, GZMO got the new Folkman compound because of the parent's expertise, not their own.
This is less true with the GZSP surgical device business, but how much extra discount does a tracking stock deserve? (EDS got none.)
I would maintain that the value of the protections/advantages offered by the larger parent versus the lack of them for most $100 million sales companies balances the reduced control over the assets and the exposure to the risk of the large parent inherent in the tracking stock. |
