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Here’s Why BrightSphere Investment Group Is Soaring Monday

By Matthew Frankel, CFP® – Updated Jul 27, 2020 at 10:27AM

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But it isn’t earnings fueling the move higher.

What happened

The stock market was having a pretty strong day on Monday, with the S&P 500 benchmark index up by about 0.6% and most other major indices higher as well. However, asset management firm BrightSphere Investment Group (BSIG -2.74%) was a particular standout. As of 10:45 a.m. EDT, BrightSphere was higher by more than 11% and was trading at a fresh 52-week high.

So what

BrightSphere's move wasn't related to earnings -- those aren't due out until next week. Rather, the company announced the sale of some key assets that will provide an influx of cash.

Man looking at laptop screen with hand raised triumphantly.

Image source: Getty Images.

Specifically, BrightSphere announced agreements to sell two assets -- its 75.1% ownership stake in investment manager Barrow Hanley for $320 million after taxes and a smaller equity stake in Copper Rock for after-tax proceeds of about $15 million.

Now what

BrightSphere plans to use the proceeds from these asset sales to pay down debt and repurchase shares, which it estimates will result in "double-digit accretion" to 2021 earnings.

In addition to the influx of cash, the divestiture of these assets will result in a more focused business for BrightSphere, which is the most important thing from a long-term perspective. According to the press release announcing the sales, the business will be "much more focused on our diversified quantitative and secondary private market strategies and will have a history of consistently generating positive net flows."

In a nutshell, investors seem to be happy about these asset sales. A narrowing focus on a core competency is almost always applauded by investors, especially when it comes with increased financial flexibility for the company.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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