Dow Inc Spin-Off: Classic Value Investment Story?

Alex Gavrish discusses Dow Inc spin-off from DowDuPont

Shares of Dow Inc, a spin-off from DowDuPont, started trading on March 20th, 2019 on a when-issued basis. At $50 per shares, Dow Inc’s market cap is approximately $37.5 billion. According to the company’s roadshow presentation, Dow Inc will have a net debt of $15 billion at the spin-off while FY 2018 operating EBITDA was $9.1 billion. This means that Dow Inc is currently valued at an EV/EBITDA multiple of x5.77. This looks low, especially compared to the valuation of DowDuPont combined: it currently trades at an EV/EBITDA ratio of about x9.3 (FY 2018 results).

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q4 hedge fund letters, conference, scoops etc

Coho Capital 2Q20 Commentary: Podcasts, The New Talk Radio

Coho Capital LogoCoho Capital commentary for the second quarter ended June 30, 2020. Q2 2020 hedge fund letters, conferences and more Dear Partners, Coho Capital returned 46.6% during the first half of the year compared to a loss of 3.1% in the S&P 500. Many of our holdings, such as Netflix, Amazon, and Spotify, were perceived beneficiaries Read More


Already before the spin-off, the company announced that initially, it plans to pay an annual dividend in the amount of $2.1 billion, which provides investors with an annual yield of 5.6% percent. Dow will also have share repurchase program in place, initially for $3 billion. Assuming that it will be implemented over 3 years, shareholders will be rewarded with an additional annual yield of 2.6% percent.

Assuming a more “normal” EV/EBITDA multiple and generation of $3 billion of FCF annually, in two years Dow Inc shares could be valued at $79 per share, which provides an upside of 58% percent.