comment on the following quote The following is from Business Week: \"Rocker, ma
ID: 2619244 • Letter: C
Question
comment on the following quote
The following is from Business Week:
"Rocker, managing partner of Rocker Partners Ltd., is a savvy player in stocks that look like candidates for restructuring. He figures that Chrysler is greatly undervalued, particularly if one ignored asset is taken into account: Chrysler Financial, its lending unit. Rocker believes that the company is considering various options, including a spinoff or sale of Chrysler Financial. Such moves invariably raise the value of a company's assets and its stock price."
Explanation / Answer
One problem the company might face with a spin off is that the current investors may believe that they are being duped. In such cases, minority investors might not be comfortable in selling the jewels of the company. If even they want to go for a spin off they should try and ensure that the company continues to have significant influence as it generates money for the company.
Such a move is helpful if the company is planning on raising funds(Mainly equity) in sometime to come.
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