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Why Manitowoc Company Inc's Shares Appeared to Crater in March

By Travis Hoium - Apr 7, 2016 at 1:45PM

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How could a stock crash but still add value for shareholders?

Image source: Manitowoc.

What: If you weren't paying attention to your brokerage statement last month, shares of Manitowoc Company Inc (MTW -0.68%) certainly took a nosedive. They dropped a whopping 73% since the end of February -- but there's actually a good explanation.

So what: On March 4, Manitowoc Company completed the spinoff of Manitowoc Foodservice (NYSE: MFS). Shareholders of the original company got one share of the new company for each share they'd owned of the old one. At the end of the day, shareholders started with $15.85 per share on the market at the end of February, and ended March with one share of each company worth a total of $19.07. That's a tidy 20% gain for the month.

Now what: The logic for the spinoff was that cranes and foodservices didn't really make sense as a combined business. And the market is certainly seeing the added value at the moment.

Keep in mind though that the underlying businesses haven't actually changed -- only their financial structure has. But if you owned Manitowoc for its cranes or its foodservices, but not both, you now get to choose which one you want to own.

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