FedEx reported strong earnings Tuesday for the last quarter that included its freight division. The freight business performed well. So they're getting rid of it.
Corporate logic says you take the thing that makes money and launch it into the void like a divorce settlement. Shareholders love this move. They read "spin-off" and imagine two profit centers instead of one, as if cutting a sandwich in half gives you more sandwich.
The freight business had one job. Move heavy shit from point A to point B without destroying it. Apparently they succeeded at this low bar with enough vigor that FedEx decided the business deserved to fend for itself. It's the corporate equivalent of kicking your kid out at eighteen because he got a B-plus.
Retail traders saw the earnings beat and bought calls at open. They do not understand what a spin-off means. They think FedEx just invented a second FedEx. By noon they'll Google "what happens to my shares during spinoff" and discover they now own stock in a trucking company they've never heard of with a ticker symbol that looks like a drunk guy fell asleep on a keyboard.
The freight unit will now operate independently, which means it gets to hire its own executives, lease its own office space, and file its own earnings reports that nobody will read. Freedom costs extra in corporate America. The spin-off will complete later this year, at which point FedEx can focus on its core business of delivering your package to the wrong address three days late.
Technical analysts don't care about any of this. The chart looks the same whether FedEx owns freight or sells it or shoots it into the sun. Price goes up, price goes down. The fundamentals are just a bedtime story investors tell themselves so they can sleep after buying at all-time highs.
Photo by Jan Rosolino on Unsplash
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