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On February 28 2019, Gap Inc announced that it would split into two companies, in effect spinning off its Old
Navy Brand, which had been its most profitable division for a long time. Investors had demanded the split, and
quickly rewarded it by a huge uptick in the company’s stock-price.
https://www.cnbc.com/2019/02/28/gap-will-split-into-two-publicly-traded-companies-with-old-navy-as-a-standalone.html
Please perform a thought experiment. Would the market similarly reward Apple in 2021 if it announced that it
was spinning off its IPhone Division? Why or why not?
Also, aside from the stock market implications, is this a good strategy from a business standpoint? Remember,
now the Banana Republic and Gap stores will be part of a different company, and will not be able to combine
resources, such as real estate deals, distribution, contractor-relations and IT.
(FYI, after due consideration, Gap decided not to go through with the split. The company remains intact).
https://www.cnbc.com/2020/01/16/gap-shares-jump-on-announcement-it-will-not-spin-off-old-navy.html
Sample Solution
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