NCR Corp. (NCR 2.93%) shareholders lost ground to a falling market on Friday. The stock dropped 22% by 2 p.m. ET, compared to a 1.3% drop in the S&P 500. The drop pushed shares further into negative territory for the year. NCR is down over 40% since the start of 2022.
Friday's drop was sparked by news that the company isn't selling itself but instead will split into two separate companies.
NCR announced late on Thursday that it is separating into an ATM business and a digital commerce business, rather than controlling the two under one enterprise. The news effectively ended speculation that NCR will be taken public, which had pushed the stock higher earlier in the year. NCR had announced back in February that it was reviewing its financial options, including a total sale.
The management team sounded an optimistic tone on the decision to split, though. "NCR has the opportunity to unlock value for our shareholders by separating our digital commerce business and our ATM business," executive chairman Frank Martire said in a press release. The company couldn't find appropriate financing for an outright sale of the business, Martire explained, in part because of the recent hike in interest rates.
The stock's decline implies that investors were hoping that the company would sell itself at a decent premium to current prices. The split, meanwhile, will add uncertainty about investor returns over the short term.
For its part, NCR believes it can create more shareholder value by operating two independent businesses. The deal should close by the end of 2023, executives said, and might still be preempted by an offer from private investment funds to purchase NCR, either in whole or in part.
Still, debt market conditions aren't as attractive as they were in early 2022 thanks to worries about a recession on the way. That's why a privatization move seems unlikely.