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Why Sallie Mae Shares Popped Temporarily

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of SLM Corp (NASDAQ: SLM  ) , better known as Sallie Mae, jumped as much as 14% after announcing a new CEO and unveiling strategic plans to split into two separate companies. Shares have since given back much of their gains and are now up just 4% as of this writing.

So what: SLM certainly excited shareholders when it announced the appointment of Jack Remondi as CEO. Remondi has served as SLM's president and COO over the past two years. More importantly, SLM is planning to split into two publicly traded entities -- an education loan management business and a consumer banking business. The thesis here is pretty simple: two companies, each with its own focus, will be easier for investors to understand and analyze, which should unlock shareholder value.

Now what: We're certainly seeing the value of spinoffs more and more of late. I believe this is a smart move for SLM, which has drawn the ire of investors and even the scrutiny of the U.S. government. Anything that would make SLM more transparent to investors could boost its share price even higher. However, until we know more about the planned separation (i.e., timing and what the shareholders' distributions will be) I'd exercise caution and suggest staying on the sidelines.

Craving more input? Start by adding SLM Corp to your free and personalized Watchlist so you can keep up on the latest news surrounding the company.

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9/30/2016 4:00 PM
SLM $7.47 Up +0.13 +1.77%
SLM CAPS Rating: **