I saw someone post on reddit that "if the FTC orders Meta be split up into Oculus, IG, whatsapp, and FB, I'd gladly invest in whatsapp & Oculus." If this were to happen, how does that affect existing stock valuation? I'm also confused about what this reddit user said, but I haven't really kept up with the FTC case, but if it's like Google becoming Alphabet, then that the stocks aren't individualized for each subsidiary entity
Every FB share would be split into fractions of the new components. Usually these types of things are accretive for shareholders because certain entities will be valued much higher without the others tying them down
It depends. There's generally three ways this can go: 1. Your share in company A becomes a share in company A and X# shares in company B. 2. Company B uses debt to buy itself out of company A. Company A shareholders still hold only company A shares and the number of company A shares remains the same. Theoretically, market cap and share price shouldn't change instantaneously if a fair price is paid for company B. 3. Like #2, but company A itself hangs onto a percentage of shares in company B. This requires less financing, but still allows the parent company to retain an interest (this could be good or bad depending on your point of view). 4. Some shareholders of company A trade their shares for shares of company B. In this case the market cap of company A goes down, but the share price shouldn't change (it might actually go up) because the number of shares go down too. I've seen this happen for employee owned companies that spin off new employee owned companies, and even then there was some amount of financing required by the child company to complete the deal. It would be rare to see for a public company do this as individual company A shareholders might want to go to company B. It would probably require instruments such as selling rights or another class of stock for certain employees that would be exchanged for a spin off of one happened. My guess is 1 or 3 would happen if Facebook wanted to spin off something. If there was some kind of judgment forcing a spin off, 2 would happen.
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