The Spinoff Scorecard: what the research says, and how we compute it free

Spin-offs are one of the most studied anomalies in equities. Across samples from 1965 onward, newly independent companies have, on average, beaten the market in the years after separation — roughly a 10% one-year excess return in the older literature (Cusatis, Miles & Woolridge, 1993; Desai & Jain, 1999). But “on average” hides the real story: the strong mean is driven by a minority of big winners, and later work (McConnell & Ovtchinnikov, 2004) finds the premium is weaker and concentrated. In fact, fewer than half of spin-offs beat their sector. So the useful question isn't “do spin-offs outperform?” — it's “can you tell the good ones apart from the bad ones in advance?”

Why spin-offs get mispriced

The behavioural case, made most famously by Joel Greenblatt (You Can Be a Stock Market Genius, 1997), rests on neglect and forced selling. When a parent distributes a new company to its holders, index and sector funds frequently have tosell it — it isn't in their index, it's too small, or it's the wrong mandate — regardless of value. The new company also lands with almost no analyst coverage (the median spin-off is followed by a single analyst) and little trading history. Indiscriminate selling plus thin attention is a recipe for temporary mispricing — and an opportunity for a patient, systematic approach.

The scorecard idea

Two finance master theses formalise this into a scorecard: Bülow & Mjörnemark (Copenhagen Business School, 2017, with Bodenholm Capital) and Lindeborg & Falck (Lund, 2019). Both score each spin-off on a set of binary factors and show that a high-score basket sharply outperforms a low-score one (in the CBS study, +60.5% vs −23.5% one-year, sector-adjusted). The method is borrowed from Piotroski's F-Score (2000), a respected accounting strategy that scores value stocks 0–9 on simple fundamental signals. The point of a binary scorecard is discipline: each factor is a clear yes/no grounded in prior research, which guards against curve-fitting.

The CBS scorecard uses ten variables across seven themes: insider incentives (management owns stock), corporate governance (an internally-promoted CEO; the CEO is not also chairman), organisational structure (the unit came out of a conglomerate; same-vs-different industry as the parent), market neglect (low analyst coverage; small size relative to the parent, which triggers forced selling), capital structure (sensible leverage, not debt-dumped), valuation (cheap on EV/EBIT) and quality (high return on capital employed).

Our version — free, SEC-only, never guessed

We compute the factors that come from the company's own public SEC filings, and we are deliberate about what we leave out. We surface, for each spin-off: whether it's focus-increasing (different sector than the parent), its size relative to the parent (a forced-selling proxy, by revenue), leverage, operating margin, ROCE (the quality metric the research weights most), whether a Form 8937 signals a tax-free structure, post-spin insider buying (Form 4), whether an activist is on file (13D), and time since the spin. These roll up into a composite Spinoff Score — a tally of favorable factors, in the spirit of the F-Score.

Two scorecard variables we cannot do honestly on free data, so we omit them rather than fake them: analyst coverage (a licensed data point) and EV/EBIT(enterprise value needs a market price, which requires a redistribution licence we don't hold). Everything we show is a fact from a filing; where a figure isn't cleanly reported, we leave it blank. And we show no prices or returns — the scorecard is about a company's structure, ownership and fundamentals, which is exactly what the research ties to spin-off outcomes.

One honest tension

The literature disagrees on industry focus. Desai & Jain (1999) find focus-increasing(cross-industry) spin-offs do better; S&P Global (2017) and the CBS thesis find within-industryspin-offs do better for the spun-off company. We present the fact (same vs different sector) and let you read it — we don't pretend the direction is settled.

These are research factors, not advice, and the spin-off premium is debated and not guaranteed. Every factor is computed from the company's SEC filings and shown on each spin-off's page. For exact definitions and sourcing, see Methodology.