Change is a good thing.

Ch.. ch.. changes.

From time to time the fine folks at Standard and Poors, who created the S&P 100 Index, tune their results to account for acquisitions, spinouts and the other typical stock organizational changes. The FOX-Disney acquisition/spinout of 2019 was a recent and complicated such a case. For Beyond ETFs users FOX and FOXA had been in the Buy* Zone for the better part of the year prior to March 2019.

In 2017 Disney (DIS) announced plans to acquire specific assets of 21st Century-Fox (FOX, FOXA). After a bidding war with Comcast (CMCSA) and lengthy regulator scrutiny around the world, the $71 Billion deal closed in March 2019.

What that meant for Beyond ETFs subscribers, is that shareholders of FOX and FOXA got shares in the new and smaller company, called Fox Corporation which encompassed the cable news, sports and TV networks not acquired by Disney AND shares of a ‘temporary’ (one-day) holding company, TFCF, that is the parent of both Disney and the acquired Fox assets and cash.

The new Fox Corporation will reuse their tickers FOX and FOXA.

The TFCF became DIS starting on Thursday, March 21, 2019.

Practically, this looked like FOX and FOXA jumped out of the Buy* zone and then lived near the bottom of the rank ordering of the Zone Changes report, with a big hit on the price per share. Not so fast. Since DIS is acquiring 74% of the stock, old FOX/FOXA shareholders get 1.26 shares of new FOX/FOXA for each share of old FOX/FOXA that they had owned, plus cash / share of TFCF. So, like most acquisitions, this is a transaction about re-distributing the value, not creating it and certainly not destroying it. Future value creation potential of the new corporate entities will naturally be reflected in the price momentum of the respective stocks.

This also meant that FOX/FOXA was no longer large enough to be part of the S&P 100, which is why the folks at S&P removed FOX/FOXA and added ADBE (Adobe Inc) to the Index.

sources:

  1. StreetInsider.com
  2. Wikipedia.org

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