Fortive (FTV) spin-out handling error?

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1

I think this spin-out was not handled properly?
Example sim: https://www.portfolio123.com/port_wiz.jsp?st=8
News: https://www.businesswire.com/news/home/20200915006277/en/Fortive-Announces-Expected-Completion-Date-of-October-9-2020-for-Spin-off-of-Vontier

2

First, the link to your sim isn’t correct. You can link it again, if you like, by looking at the Summary page and copying the link.

As for FTV, at a glance it looks correct to me. There is a special cash-equivalent $13.00 dividend on 10/9/2020, and the unadjusted price in our database went from $81.79 to $69.82 the next day. The difference is from the next-day’s trading, I’d imagine, with it being “up” $1.03.

Also, you should know that in these situations we assume that you are liquidating the received shares immediately upon receiving them. This is an assumption that is built into the engine and is not configurable. It’s also been quite reasonable, in my experience. The idea is that you are testing rules, and spun-off companies almost never have the same qualities that caused you to buy them or hold them.

The overall effect of that immediate liquidation is that you will receive the cash-equivalent dividend rather than the received shares, so if you’re just getting a cash injection that’s expected.

But it’s possible that you’re seeing something that I’m not. Feel free to link the sim here or send a link to paul@portfolio123.com and I’ll take a look.

3

Paul,
Sorry about the link, here is the link to the summary page:
https://www.portfolio123.com/port_summary.jsp?portid=1627255
If you treat the spin-out as a special dividend, is that reflected in the equity curve?
Thanks-

4

Incidentally, this is a live trade, I made about 14% return on FTV, but have a loss of about 16% on the spin-out VNT…

5

The special dividend is treated as a cash dividend. You are assumed to sell the shares immediately at their economic value at the time that you receive them.

If you continued to hold VNT…yeah, they went down. :frowning:

In a live strategy, you could edit the transactions to keep the received shares. You can’t do that in a simulation. About the only thing that you could do would be to use this as a sell rule:

Ticker(“VNT”)

And then rerun. It should kick VNT at the next rebalance after it receives it.