Why Telus Is a Stock on My Watch List Now
The recent spinoff of Telus International Inc. (TSX:TIXT)(NYSE:TIXT) from parent company Telus Corp. (TSX:T)(NYSE:TU) this past week has provided optimism around the ability of this telecom player to capitalize on equity markets right now and increase its overall value via spinoffs moving forward. The market is now anticipating another spinoff on the horizon, with Telus’ health division a likely target of an equity raise in this environment. Telus also has an agriculture subsidiary, which is expected to follow suit as some point in the future as well.
Indeed, these spinoffs make complete sense for Telus right now given how hot the initial public offering (IPO) market is right now. Additionally, these IPOs raise much needed funds the company can use to finance its 5G rollout. These are strategic moves I think make a heck of a lot of sense for Telus shareholders, and should increase shareholder value over time.
Telus Corp retains control of the entity through multiple voting shares, with subordinated shares sold to the public. This allows Telus to retain a stake in the subsidiary while maintaining control, a win-win for investors and the company alike.
Given how hot the IPO market is, and how high equity valuations are right now, I think this model is likely to be pervasive across the stock market in years to come. Raising capital via equity markets is something I think companies are going to choose to do to a greater degree, particularly companies like Telus in capital intensive sectors.
Accordingly, I’m keeping these stocks on my watch list now to see how they perform, which will likely have an impact on future offerings.
Invest wisely, my friends.