This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Pfizer's Spin on Spinoffs a Turnoff

Stocks in this article: PFE

NEW YORK ( TheStreet) -- Pfizer (PFE - Get Report) may have led some investors to the exits on Thursday when the giant pharmaceutical company made official the divestiture plans for its animal health and nutrition businesses.

Shares reacted negatively to news that everyone on Wall Street had already taken for granted: It's considering strategic alternatives for its animal health and nutrition businesses, that could include a spinoff or asset sale.

Pfizer shares closed 3% lower on heavy volume Thursday, with more than 85 million shares traded. The three-month average daily share volume for Pfizer is 44 million shares. Pfizer shares dropped sharply at the open and drifted down through the day.

A potential spinoff could be a payday for investors. It could also ultimately provide Pfizer with the cash to buy back shares and invest in a potential blockbuster drug. However, analysts say the potential payday for divestitures was already reflected in the 16% rise in Pfizer shares year to date.

In effect, it's back to the basics of the pharmaceutical business and the stock fundamentals, with Pfizer saying in print what's already been assumed by Wall Street.

"People haven't owned this stock for the R&D prowess it hasn't exhibited, but because they might be beneficiaries of spinoffs," said Les Funtleyder, health care analyst at Miller Tabak and manager of the Miller Tabak Healthcare Transformation Fund.

In this respect, Thursday's Pfizer trade was a classic sell-on-the-news-that's already-known event. However, there's a more negative way to read the Pfizer announcement, too.

For proof of the strategic alternatives being the "worst kept secret" on the Street, just look back at the last quarterly earnings conference call with analysts. The first question for new Pfizer CEO Ian Read, from Goldman Sachs analyst Jami Rubin, included these requests: "Share with us, if you have narrowed your options regarding strategic alternatives for your diversified businesses ... clarify what your plans will be if assuming you do spend or sell some of these businesses, what you will do with the cash proceeds?"

In answering the analyst question, Pfizer CEO Read said, "We are still reviewing all of our alternatives on the businesses outside of the core. We expect to start making some announcements during the second half."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,387.21 -291.49 -1.65%
S&P 500 2,029.55 -27.54 -1.34%
NASDAQ 4,681.4970 -90.2660 -1.89%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs