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Why Apartment and Investment Management Stock Plunged 86% at the Open Today

By Reuben Gregg Brewer - Dec 15, 2020 at 10:58AM

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The landlord made some changes to how it operates, which really aren't that big when you step back and examine what's transpired.

What happened

Shares of real estate investment trust (REIT) Apartment and Investment Management ( AIV ) fell a huge 86% at the open of trading on Dec. 15 to a bit under $6 a share. The thing is, investors shouldn't get too caught up in the decline because it's just a function of a key business makeover that was completed today.

So what

Apartment and Investment Management (AIMCO) essentially split its business into two parts. One, which retained the Apartment and Investment Management name, is focused on the development and redevelopment of apartment properties. The other, called Apartment Income REIT ( AIR -0.66% ), owns a collection of operating apartment assets that use to be a part of AIMCO's business.

It's a logical breakup -- putting mature income-producing assets into one company and construction and development oriented assets into another. That, theoretically, will allow both to shine in their own way. 

A woman raising her arms in triumph in front of a computer.

Image source: Getty Images.

Shareholders of the old AIMCO received one share of Apartment Income REIT for each share of AIMCO stock they owned as of Dec. 5. Fractional shares will be paid in cash.

Apartment Income REIT started the day trading at a little under $40 a share. That's roughly what AIMCO closed at the day before, so investors are actually up on the day when you add the value of the two stocks together.     

Now what

At this point, investors have to make a choice, including the choice to do nothing. AIMCO is a development-focused company; Apartment Income REIT is a more traditional property-owning REIT. You can own both, effectively retaining what existed before, or pick one of the two based on your investment preferences. Either way, that big drop in Apartment and Investment Management stock is not what it seems at first.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Apartment Investment and Management Company Stock Quote
Apartment Investment and Management Company
AIV
AAR Corp. Stock Quote
AAR Corp.
AIR
$33.33 (-0.66%) $0.22

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