What happened
Shares of Arconic (HWM 2.47%) took off this year, rocketing higher by a massive 53% through the first six months of 2019 according to data provided by S&P Global Market Intelligence. There was a lot going on for the specialty products maker, which has largely struggled since it separated from aluminum giant Alcoa in late 2016. From the beginning, Arconic has had a somewhat contentious relationship with large shareholder Elliot Management, which again became an issue this year.
So what
Elliot Management, which has seats on the board in addition to a large financial stake in Arconic, has been pushing for change. That notably includes a desire to sell the company. So it wasn't too much of a surprise to hear in mid-January that Apollo and Arconic were discussing a sale. Just a few days after that news leaked, though, the deal had been called off. A disagreement over price and legal concerns surrounding product liability from a massive U.K. building fire related to some of the company's products had apparently scuttled the deal. Investors were not pleased with that outcome, sending the shares sharply lower on the news. At that point, though, Arconic announced that it would conduct a strategic review of its business.
Image source: Getty Images.
That review led to the installation of new leadership, a dividend cut of 66%, and a plan to break the company up into two parts. One piece of the company would own the division that was tied to the products involved in the U.K. building fire, and the other the far more desirable aircraft parts making assets. In addition to that, the company announced that it would execute all of a $500 million stock buyback in the first half of the year and authorized another $500 million buyback plan to follow that up. By the end of June, Arconic had announced $900 million worth of buybacks.
A lot happened in the first half, but it appears investors are reacting well to Arconic's strategic decisions following the failed buyout attempt.
Now what
There's still a lot of heavy lifting to be done at Arconic since it has yet to complete the proposed split. It is, basically, a special-situations stock at this point. That means it's only appropriate for aggressive investors willing to bet on the outcome of the company's strategic overhaul. Most investors should probably sit on the sidelines until the split has been finalized.
