Why KAR’s 61% Drop Was Not A Bad Thing
Why KAR’s 61% Drop Was Not A Bad Thing
What happened
Investors in KAR Auction Services (NYSE: KAR) were in for a surprise on Friday morning, with some data services showing the shares down 61% in morning trading. There’s a good explanation for the apparent fall, and fortunately it does not involve shareholders losing more than half of their investments.
So what
Before markets opened on Friday, KAR completed its long-planned spin of its IAA salvage auction business. The company distributed 100% ownership of IAA (NYSE: IAA) to its shareholders, each KAR shareholder receiving one share of IAA common stock for every share of KAR held.
Shares of KAR closed at $62.08 apiece on Thursday, and after the split are trading at around $24 on Friday, an apparent 60% drop. However, shares of the newly christened IAA are trading at $40.89 at the time of writing, meaning that holders are actually up slightly on the day.
Some financial sites, including Yahoo! Finance, were on top of the spin and adjusted KAR’s historical prices accordingly. Others did not, causing the headline-grabbing decline.
