Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted the morning of May 6, 2022, in a Fast Company article—by Sam Becker, “Bausch + Lomb stock will start trading on the NYSE, priced lower than expected in IPO”—regarding that day’s upcoming (and successful) Bausch + Lomb spinoff/IPO.
Below are the excerpted quotes:
Publicly traded spinoffs like the Bausch + Lomb IPO are not altogether uncommon. PayPal, for instance, was spun off from eBay in 2015. Fast-casual Mexican food chain Chipotle was spun off from McDonald’s in 2006. Primarily, companies will spin off subsidiaries or divisions into their own independent firms because it’s beneficial to do so—often, it frees up corporate resources and can unlock further value for shareholders. Sometimes, a spin-off target may appeal to an entirely different group of investors, which may help it raise more capital by going public.
This may be the case with the Bausch + Lomb IPO. Prior to spinning off its subsidiary, Michael A. Schulman, a founding partner and CIO at California-based Running Point Capital Advisors, says that Bausch Health combined two “very different types of healthcare companies.” Those being a pharmaceutical giant, and a consumer-product-focused company in Bausch + Lomb.
“Although the divisions may seem synergistic because they both operate within healthcare, the two parts of the company appeal to completely different sets of investors,” he says. “Right now, Bausch is the meal equivalent of combining premium ice cream with Bolognese pasta on the same plate. Separately, they have a lot of appeal. But combined together, not so much.”
The full original quote was:
“The problem with Bausch Health Companies Inc. is that it combines two very different types of healthcare companies:
- An exciting pharmaceutical/biotech company that should be valued based on its pipeline of future drugs and discoveries for central nervous system disorders, eye health, and gastrointestinal diseases; and
- A stable cash cow consumer products and health group (Bausch + Lomb) that sells contact lenses and medical equipment that should be valued on fundamentals.
Although the divisions may seem synergistic because they both operate within healthcare, the two parts of the company appeal to completely different sets of investors. Right now, Bausch is the meal equivalent of combining premium ice cream with Bolognese pasta on the same plate. Separately, they have a lot of appeal; combined together, not so much.
Splitting Bausch + Lomb from Bausch Health will simplify the narratives of both companies and allow them to appeal to specific sets of investors; those that want more risk and potentially more upside versus those that desire more stability.”
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-42