Shares of Solventum, the healthcare division soon to be separated from 3M, have commenced trading at an initial price of $80.
This early trading, referred to as when-issued trading, provides investors with insight into the valuation of the new entity before shares are officially deposited into brokerage accounts.
Solventum is currently valued at around 13 times its projected 2024 earnings, with anticipated earnings per share ranging from $6.10 to $6.40 for the year. This valuation positions Solventum at a modest multiple in comparison to the broader S&P 500 index.
3M’s Strategic Spinoff
The spinoff of Solventum from 3M signifies a pivotal strategic maneuver for the conglomerate.
Shareholders of 3M are poised to receive one share of Solventum for every four shares of 3M they possess, thereby attributing a value of $20 per share to Solventum within the framework of 3M’s stock.
On Tuesday, this distribution suggests that the remaining sectors of 3M’s operations are effectively valued at $82.63, as per the closing price of $102.63. These sectors, comprising transportation, industrial, consumer, and electronics divisions, collectively yielded sales exceeding $24 billion and generated an operating profit of approximately $4.8 billion in 2023.
The spinoff is slated for completion by April 1, with Solventum scheduled to be listed on the New York Stock Exchange under the ticker symbol SOLV.
Legal and Economic Challenges
3M has encountered various hurdles, encompassing legal entanglements and an economic deceleration, which have had a discernible impact on investor confidence.
The company is actively addressing issues surrounding chemicals detected in water reservoirs and potentially defective earplugs distributed to military personnel.
Notably, a reported $5.5 billion settlement to resolve claims regarding the earplugs was viewed favorably for 3M stock by RBC analyst Deane Dray. Likewise, 3M revealed a $12.5 billion settlement with U.S. water suppliers aimed at facilitating the mitigation of PFAS chemicals.
These legal resolutions and ongoing litigations have exerted a substantial influence on 3M’s stock performance, with shares witnessing a decline of approximately 60% from the peak levels reached in 2018.
