Leveraging again on in its legacy of producing successful spinoffs from its coterie, IAC/InterActiveCorp (IAC) announced yet another spinoff of its full stake Youtube rival — video software company, Vimeo, explains Jim Osman, founder of The Edge Consulting Group and editor of Spin-Off Report Lite.

IAC announced the Board’s spinoff plans on Dec 22, 2020. Now, IAC plans to hold a stockholder meeting in Q1 2021 for approval of the spinoff, which, if approved, is expected to be effected in Q2 2021. 

This would be the 11th spinoff to be emerging from IAC and its predecessor and it would be a tax-free all share distribution. The transaction would majorly be a reclassification of IAC shares, with IAC stockholders receiving a proportionate amount of Vimeo stock.

IAC is known for implementing successful spins from its kitty, with its latest split — Match Group Inc. (MTCH) gaining around 41% since its separation from IAC on July 1st, 2020 — with both IAC and MTCH outperforming the broader S&P500 index by ~55% and ~21%, respectively since separation.

The major benefit seen from the separation is a creation of a “Pure Play” video software company, primed to benefit from the increased appetite for daily online video consumption, which was amplified with majority of world’s population locked inside their home due to worldwide Covid-19 induced lockdown.

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A surge in demand in 2020 driven by the COVID pandemic, had led to Vimeo registering 1.5m paying subscribers, including more than 3,500 enterprise customers including Amazon, Starbucks, Deloitte, Rite Aid and Siemens.

According to IAC’s Q3 2020 earnings announcement, Vimeo was profitable in Q3 and grew overall revenue 44% YoY. For 9M 2020, Vimeo revenues were $199.4m, up 41% YoY.

Separation provides Vimeo with access to raise capital more effectively with an aim to invest further in products, technologies, enterprise sales and international expansion and allow it to pursue strategically value enhancing acquisitions. Further details will be made available in upcoming filings.

We see IAC would continue on its path of successfully and profitably Spinning off further assets such as its majority stake in ANGI Home Services, Inc. (ANGI) and wholly owned businesses like Dotdash, Turo, and others, further making IAC an attractive investment avenue.

Furthermore, the doubling of an insider position in August 2020 by Director Michael Eisner, has yielded him a return of more than 51% since his addition, which assures of increased confidence the upper echelon holds in the company. 

Potential Upside: IAC continues to unwind its conglomerate discount and we favor this as a longer term hold and a staple in anyone’s portfolio with multiple value creation down the line in terms of spinoffs.

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