Chesapeake Energy (CHK) Planning Spin-off

One of the reasons stock spin-offs are said to outperform the market in their first three years of existence is that they are often sold for reasons unrelated to the actual prospects of the the company which results in an undervaluation of the shares.

In the case of the announcement by Chesapeake Energy that they intend to spin-off their midstreams operations to unlock assets, one may wonder if this one will work that way. It is in the same general industry as the parent, so analysts probably do know how to evaluate it. However, its size may initially work against it as perhaps would the possibility that it will come out as an MLP.

MLP's in similar businesses are certainly not overpriced right now, though some who follow them say they are undervalued and misunderstood. So, maybe just entering this field will put this one in a reasonably good buy range.

Time will tell.