Please ensure Javascript is enabled for purposes of website accessibility

Why KAR Auction Services "Plummeted" 55.5% in June

By Steve Symington - Updated Jul 8, 2019 at 1:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Believe it or not, last month's drop was a planned event.

What happened

Shares of KAR Auction Services (KAR -0.54%) plunged 55.5% in June, according to data from S&P Global Market Intelligence, but that's only because the vehicle auction services company completed the spinoff of its IAA (IAA 0.57%) salvage auction business, which it first announced in early 2018. IAA, for its part, is now a publicly traded company listed on the New York Stock Exchange and consists of each of the pre-separation salvage auction businesses of KAR: Insurance Auto Auctions in the U.S., Impact Auto Auctions in Canada, and HBC Vehicle Services Limited in the United Kingdom.

Meanwhile, KAR still operates its remaining physical, online, and other digital whole car auction marketplaces and related services like inspections, fleet management solutions, and dealer floorplan financing.

A gavel and a car key


So what

To be clear, KAR shareholders did not lose more than half of their investments during the spinoff. Rather, KAR investors kept their existing number of KAR shares, but were also given a single IAA share for every KAR share held as of 5:00 p.m. on the record date of June 18, 2019, in effect making the spinoff a zero-sum game.

Now what

However, while KAR (and no IAA) shareholders technically saw no difference in the dollar balance of their brokerage accounts, KAR management believes the split will create shareholder value over the long run.

KAR chairman and CEO Jim Hallett called it the "beginning of a new era for KAR and our investors, employees and diverse customers around the globe," leaving both companies better positioned to accelerate their respective strategic growth initiatives.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

KAR Auction Services, Inc. Stock Quote
KAR Auction Services, Inc.
$14.64 (-0.54%) $0.08
Insurance Auto Auctions, Inc. Stock Quote
Insurance Auto Auctions, Inc.
$37.15 (0.57%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.