A jigsaw puzzle problem

Running Point and its chief investment officer, Michael Ashley Schulman, CFA were quoted by Reuters— in an article by Granth Vanaik, “Kellanova, WK Kellogg Co shares slump on first day after spinoff” —regarding why Kellogg share prices were down so much!

Kellanova fell more than 7% after the packaged food giant, previously known as Kellogg Company, completed the spinoff of its North American cereal business into a new standalone entity called WK Kellogg (down more than 11%). Both companies were trading for the first time under their new corporate names.

Lack of demand

WK Kellogg Co (KLG), a $1.2 billion market capitalization company, was probably being sold out of any large-cap and mid-cap funds that previously held Kellogg. Since large and mid-cap funds have much more total capital than small cap funds, there was not enough short-term purchase demand to sustain the price.

For Kellanova (K) there remains some doubt as to its ability to become a global snack dynamo while juggling cereal, noodles, and plant-based product lines. Investors that already own Kellanova post spinofft are probably not looking to own more of the company, thus those that are selling are not finding much demand for their shares.

Article excerpt is below:

“What we are seeing today with the share declines in Kellanova and WK Kellogg is a jigsaw puzzle🧩problem; in other words, the pieces just don’t fit in many institutional and strategic portfolios,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

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