IAC Jumps on Plan to Spin Off Vimeo Video Service

IAC shares jumped after Barry Diller’s media/internet titan said it would spin off its stake in video hosting/software company Vimeo to IAC holders.
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IAC  (IAC) - Get Report shares jumped on Tuesday after Barry Diller’s media/internet titan said it would spin off its stake in video hosting and software company Vimeo to IAC holders.

“Upon completion, Vimeo will become an independent separately-traded public company, the 11th such company to emerge from IAC and its predecessors,” IAC said in a statement. 

It plans a stockholder meeting in the first quarter to review and approve a proposal to implement the spinoff. If it's approved, it's expected to go into effect in the second quarter.

IAC recently traded at $183.85, up 14%. The shares have more than doubled year to date, as the covid pandemic sparked huge demand for video content.

“The separation is expected to afford numerous benefits, such as the creation of pure-play Vimeo equity currency through which the company could more effectively raise capital as it aims to invest further in product, technology, enterprise sales and international expansion and pursue strategic acquisitions,” IAC said.

Morningstar analyst Ali Mogharabi last month offered positive commentary about a potential spinoff of Vimeo.

“IAC is now considering a spinoff of Vimeo, which its last funding round implied carries a valuation of nearly $3 billion,” he wrote. 

“We applaud the firm’s timing as the [software as a service] and overall cloud markets remain in high demand.”

Further, “we have increased our revenue and adjusted Ebitda projections mainly due to strengthening of Dotdash ad revenue and higher margin assumptions for Vimeo during the next few years,” Mogharabi said. 

“Those adjustments to our model result in a fair value estimate of $112, up from $95.”