ADR Forum

[vikas72]

I have been hearing a lot of buzz around 500-b stocks. Any one has actually tried 500-b stocs ? What exactly are 500b shares ?
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[gadha]

Well the concept of 500-b shares orginates from the limitation of a very large company to grow. There is less likelyhoo for a company worth $50 billion to double in couple of years while it is easier for a $50 million company to grow in a couple of year.

So why would anyone, especially an institutional investor be interested in pumping money in a "big" company ?

So the workaround is to spin off a small section out of a big company. The spin off company will then offer these 500-b shares at a nominal price compared to the parent company.


Some excerpts from stock gumshoes.com

On average, spinoffs do outperform the broader market.

Folks have speculated that there are several possible reasons for this:

1, that spinoffs can perform better when they can make their own decisions, without having to please a corporate parent who may or may not be in the same business.

2, that parents price spinoffs, when they do sell them as IPOs (instead of dividending the shares out to their own shareholders), fairly nicely to start because they want to get lots of happy share holders and drive the price up (in this case, parents often hold on to a majority of the shares for a while and slowly sell them off).

3, investors often have a chance to buy these cheap, because institutional investors often aren’t interested in the small spinoff and sometimes aren’t allowed to hold it, depending on their guidelines. On the same tack, analysts don’t often cover these companies right off the bat, and the analysts of the parent company might just be happy that dropping the distracting subsidiary will help the greater cause, so the shares can often stay under the radar for a while (not Chipotle, but sometimes).
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[tanu]

Gadha,

Thanks for your insight. This was helpful. Anyone has idea of any upcoming 500-b shares ....

[tanu]

Altria ( sticker MO ) is a spin off from Philip Morris International. I heard they offered 500-b stocks ... Not sure. I am still investigating. Try looking for the sticker symbol MO elsewhere ...

[tanu]

Some fact about the Altria offer ....

Spin-Off of Philip Morris International (PMI)

The Board of Directors of Altria ( MO) voted today to authorize the spin-off of 100% of the shares of Philip Morris International (PMI) to Altria's shareholders.

The distribution will be made on March 28, 2008, to Altria shareholders of record as of 5:00 p.m. New York City Time on March 19, 2008 (the "record date").

Altria will distribute one share of PMI for every share of Altria common stock outstanding as of the record date, based on the number of Altria shares outstanding at 5:00 p.m. New York City Time on that date.

After much consideration, Altria's Board of Directors and management determined that PMI's separation from Altria will enhance growth and shareholder value by providing the following benefits:

[vikas72]

[quote="tanu"]Altria ( sticker MO ) is a spin off from Philip Morris International. I heard they offered 500-b stocks ... Not sure. I am still investigating. Try looking for the sticker symbol MO elsewhere ...[/quote]

Get your facts correct. Philip Morris (MO) is the spin off from Altria, not the other way round.
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