>>For people who are confused about the "spinoff" announcement, I think it simply meant that FNET will operate as a separate company with independent management even though it is still majority owned by Franklin.<<
Mr. Best,
However, we do not know the full terms of said spin-off, has management agreed to "x" compensation package that would affect the level of ownership of FNET by FTEL? If so, that changes the picture for those who invested in FTEL in the past.
In addition, As to market prices, for FTEL, in most cases prices are derived from expectations of future events, in a bb stock such expectations are harder to determine due to many events that may or may not take place.
Having said that, the potential change in the ownership structure of FNET, creates an element of doubt in the eyes of the FTEL investors and potential investors. i.e. it creates an "unknown", markets hate unknowns, because although FNET will create revenues, we do not know the % of ownership that will belong to FTEL, since that could have changed, and same goes to the valuation assessed to FNET as an asset of FTEL.
So far market reaction seem to be, at best, of hesitation, perhaps the market is giving FTEL, the benefit of the doubt, since the price seems to remain stable. AS more data becomes available, indeed the earnings report soon to be announced may be the information that the market needs to really evaluate the meaning of the spin-off.
Again, future expectations, as far as I know, there has been no opinion by management of the new picture.
A consideration to take into account is that many were not expecting this move, but rather an IPO in which FTEL would receive a direct benefit upon executing it. I focus on the "change of plans", since, again, it creates an atmosphere of, "I do not know what is next".
It would have been interesting to have the price of FTEL at say, $5.00 or $7.00, to see what the market reaction and opinion as to the valuation of FTEL under the new scenario.
My opinion only, and yes, I could be mistaken. For now, only observing the next few days, to have a clearer picture.
Z. |
