Hewlett-Packard has released a little bit more information about its pending spinoff, but there are still a lot of blanks the company has not filled in yet. The tax-free spinoff of HP Enterprise is approaching fast, but the company still hasn’t revealed any key details about the new company’s capital structure.
HP files first Form 10
In a report dated July 2, Stifel analyst Aaron Rakers and his team provided their analysis of Hewlett-Packard’s first Form 10, which was expected early this month. They note that the filing does give some “incremental historical operating details on how we should think about HP Enterprise,” but it was lacking in the area of capital structure for HP.
More specifically, they pointed out that there are some considerations like cash, assets, debt and other related items that have yet to be transferred to the new company. They also said that the details HP did share about HP Enterprise’s operating segment aren’t much different than what the company previously released.
However, they do now include a number of corporate expenses that had been previously unallocated. The Stifel team noted that the filing indicates that HP Enterprise’s CCC metrics are “incremental / clean,” for example, 30-40 days. They also said this was a positive trend driven by improvements in days payables.
Hewlett-Packard to separate on Aug. 1
Hewlett-Packard will gradually release more and more details about the tax-free spinoff of its enterprise division through additional Form 10 filings. The company should provide more color on capital structure and strategies for capital returns in early to mid-August. HP an HP Enterprise will begin separate operations on Aug. 1, and then shares of the SpinCo are expected to be distributed on Nov. 1.
After the separation, HP Enterprise will own about 15,000 patents, compared to the approximately 34,000 patents HP Consolidated had as of the end of the 2014 fiscal year.
Rakers and team continue to rate Hewlett-Packard as a Hold.