I'm specifically talking about Harley Davidson and its spin-off company LiveWire. LiveWire has its own independent stock(it's publicly traded) and its own independent business. But what's really mind boggling is that Harley Davidson owns 74% of LiveWire.
So does that mean when LiveWire has a really amazing quarter while breaking all the sales records and profit records, its OWN stock which is LiveWire goes up but also Harley Davidson's stock goes up? It feels like it's "double counted". I'm very confused. Can anyone explain?
Does the parent company benefit(stock wise) if its spun off company does well?
byu/cakewalk093 ininvesting
Posted by cakewalk093
2 Comments
Stock price is just what people are willing to pay for something on the second hand market. The stock price of an investment would be an unrealized gain classified as other comprehensive income on the income statement and separately stated from operating income. In a well functioning market, the shareholders’ willingness to buy higher value shares should be tied more to operating income as a better indicator of lasting, sustainable value.
In today’s market, up is left, down is circle, and the points no longer matter so who knows.
You gotta think of it as a sum-of-parts valuation.
HD’s operating results wouldn’t have changed (all else constant), but their investment in LiveWire has increased in value. Thus, the total value of HD as a company has increased, so your investment in HD should go up in value.
It’s not double counting, because they’re two separate things. No different than how your personal net worth increases because your house has increased in value. With one comes the other.