Amerco (NASDAQ: UHAL), the parent company of U-Haul, North America’s largest do-it-yourself (DIY) moving company, operates three reportable segments: (1) Moving & Storage (93% of sales and 96.5% of EBITDA in F2021), which rents trucks, trailers, and towing equipment as well as owns/operates a large portfolio of self-storage space; (2) Property & Casualty Insurance (2% of sales and 2% of EBITDA), comprised primarily of Repwest Insurance, which provides insurance for U-Haul customers and equipment; and (3) Life Insurance (5% of revenue and 1.5% of EBITDA in F2021), which  serves the senior citizen market via its Oxford subsidiary.

UHAL is the dominant player in the DIY moving market, with durable competitive advantages in proximity, availability, and price. In our estimation, at ~5.0x F2023E EV/EBITDA and ~9.0x F2023E EPS, UHAL is undervalued relative to the sum value of its parts, particularly the high-margin/low-incremental-capex Storage portion of its core business. In that context, we would also highlight the stark shift in management’s tone during the company’s most recent earnings call, which suggested a seemingly greater willingness to explore potential avenues for unlocking incremental value from its self-storage business (e.g., via a REIT conversion or a spin-off, among others) as well as potentially to pursue ancillary measures, such as the institution of a regular dividend, a stock split, share repurchases, and/or a change in the corporate moniker to U-Haul.

Considering our financial projections as well as peer and M&A valuations, value of $902 per share and $18 per share can be assigned to UHAL’s Moving & Storage and Insurance businesses. Accounting for projected net debt of ~$155 per share yields a base-case sum-of-the-parts value of roughly $765 per share (with bull/bear cases of $907 per share and $624 per share, respectively). Potential catalysts include the monetization/separation of assets, earnings growth, more granular financial disclosures, and/or the implementation of a regular dividend, stock split, or share repurchase program. Potential risks include management execution, competition/pricing pressure, and/or a recession.

On December 20, 2021, after the market close, Fortress Transportation and Infrastructure Investors LLC (NYSE: FTAI) announced that it had confidentially filed a Form 10 with the SEC in relation to a potential spin-off of its infrastructure business. The spin-off, if completed, is expected to benefit both post-spin entities, given differing end-markets, strategies, and performance.

As currently posited, the spin-off would be completed via a pro rata distribution of shares in the infrastructure business to FTAI shareholders of record as of a yet-to-be determined date. FTAI initially stated that it targeted completion of the separation in 1H 2022 and that it would be subject to standard conditions, including final Board approval. Subsequently, the company has stated that it expects to complete the separation in April 2022. It should be noted that while management appears confident that the transaction can be completed within the brief period from the time of this writing, minimal disclosures have been made public, aside from ancillary commentary made during public appearances. As of this writing, it is unclear how many confidential Form 10s have been filed with the SEC.

Management has stated that it expects the post-spin companies to adopt the corporate monikers of FTAI Aviation and FTAI Infrastructure. As for capital structure, it is looking to raise $500 million in debt financing and is also contemplating, but has not yet finalized, an alternative structured equity component for $300 million, both of which will be placed with Aviation. Management stated that Aviation will carry about $1.8 billion in debt and that Infrastructure will carry about $1.2 billion in debt. Per management, targeted debt-to-EBITDA is said to be 4x-5x for FTAI Infrastructure and 3x-4x for FTAI Aviation, although it is unclear if that is on a net or gross basis.

For our sum-of-the-parts valuations, for Aviation we assign an in-line 10.5x multiple to $550 million in EBITDA, resulting in an enterprise value of approximately $5.8 billion. For the Infrastructure business, we assign a one-turn discounted multiple of 6.0x to the Jefferson and P&T operations and an 11x multiple to Transtar. We note that our Transtar multiple is a discount to those of the far-larger-reach rail operators used for comparison but is a premium to the implied purchase multiple, as the company’s relationship with U.S. Steel should provide a stable earnings base, with opportunities to expand revenue sources in the future. Based on our applied multiples, FTAI Infrastructure’s operating segments would have an enterprise value of $1.6 billion. We value Corporate & Other assuming a $60 million loss run rate at 9.8x, the weighted average of our applied multiples. Based on these calculations, we derive a consolidated $6.8 billion pre-spin fair enterprise value. Accounting for net debt of $3.2 billion and 99.2 million shares outstanding, we fairly value pre-spin shares of FTAI at approximately $37 per share.

We view positively the Aviation company’s ability, post-separation, to receive a rerating to a higher multiple to more closely approximate those of other aircraft leasing companies, while noting that a growing services business could provide incremental upside. For Infrastructure, the company’s terminal assets appear to be uniquely positioned to capitalize on increased demand for NGLs in addition to oil-by-rail distribution. Further, the Transtar acquisition provides a sizeable and stable earnings base for an independent infrastructure company to grow from, given its relationship with and proximity to U.S. Steel production facilities. Lastly, the widening of the potential investor base that comes with converting to a C-corp should not be overlooked. FTAI currently has passive ownership, whereas many of the peers cited in this report have ownership profiles dominated by index funds that may now be able to purchase shares of the post-spin entities. Given the implied upside from the current share price, the company’s differentiated asset base, and the incremental benefits that the spin-off will provide to shareholders, we rate FTAI at BUY prior to the separation.

On May 17, 2021, before the market open, AT&T Inc. (NYSE: T) announced an agreement to spin off WarnerMedia, which will immediately merge with Discovery Inc. (NASDAQ: DISCA, DISCB, DISCK) via a Reverse Morris Trust (“”RMT””) transaction. The transactions, which are expected to be completed in April 2022 and be tax-free to shareholders, will include an approximately $43 billion dividend paid by Discovery to T and will result in AT&T shareholders of record owning 71% of the newly combined company, with Discovery shareholders of record owning the remaining 29%. The newly combined company will adopt the corporate moniker Warner Brothers Discovery Inc. (“”WBD””). AT&T shareholders of record as of April 5, 2022, will receive 0.24 shares of WBD for each share of T upon completion of the RMT. Warner Brothers Discovery will trade on the NASDAQ under the ticker “”WBD.””

AT&T’s WarnerMedia segment owns a portfolio of media assets that include streaming service HBO Max, premium video channels HBO and Cinemax, news network CNN, movie studio Warner Brothers, and television networks TBS and TNT, among others. The assets were primarily acquired in 2018 when AT&T purchased Time Warner Inc. in a stock and cash deal that at the time was valued at $85 billion. Since the acquisition, the company has focused on the development and rollout of its HBO Max streaming service, including continued investment in its original content portfolio.

Discovery Inc. is a global media company that includes linear platforms, free-to-air and broadcast television, and direct-to-consumer subscription products. The company has a significant worldwide presence, with approximately 12 channels in every country, and boasts 3.7 billion cumulative subscribers and viewers. The company’s portfolio includes brands such as Discovery Channel, HGTV, Food Network, and TLC, among other well-known properties. In January 2021, the company launched its Discovery+ streaming platform, which includes a vast catalog of original programming from across the company’s channels and exclusive original series. In 2020, Discovery generated $10.7 billion in revenue and $4.4 billion in adjusted EBITDA.

With respect to rationale, the transactions appear to make sense for both companies. At the time of the WarnerMedia acquisition, AT&T posited that the synergies attainable from the combination of distribution and content would provide long-term sustainable revenue and earnings growth opportunities. Following a three-year integration period, it appears that T now recognizes that the immense capital requirements for the two businesses have proved difficult to fund, given the increasing cost of building out 5G and fiber networks for the company’s core Communications business, while increased competition in the streaming industry has resulted in the need for greater scale and higher spending to produce dynamic content for which customers are willing to pay. Following the separation, AT&T will have increased flexibility to build out its 5G networks and deploy fiber assets in order to drive Communications revenue growth. For its part, Discovery will instantly add approximately 73.8 million subscribers to its DTC platform and will have expanded content production capabilities outside of its core programming (i.e., movies and TV shows), allowing it to better compete in the “”streaming wars.””

Following the spin-off of WarnerMedia, AT&T will be a more focused company that will look to increase its 5G wireless coverage and fiber reach. Within Mobility, the company will accelerate investments to support next-generation network services, with an eye to achieving profitable market share gains.

It can be expected that upon completion of the merger, WBD’s multiple is likely to expand over time to better reflect the company’s significantly larger streaming subscriber base and could come to more closely approximate the multiples of diversified media peers with sizeable streaming exposure. Applying a 10.5x multiple to our 2023 WBD EBITDA estimate, we fairly value shares of Warner Brothers Discovery Inc. at $35 per share. Given the implied upside from the current Discovery share price, we rate pre-merger shares of DISCK at BUY.

On a pre-spin basis, we fairly value shares of T at $29 per share, which includes the value of 0.24 shares of WBD at the current DISCK share price. While a 22% implied price appreciation is generally considered attractive, in the context of this transaction, we favor the risk-reward scenario of WBD versus the risk-reward for T, and as such we rate pre-spin shares of AT&T at NEUTRAL. On a post-spin basis, we fairly value shares of AT&T at $21 per share, which is based on an average of a 7.0x EBITDA multiple on our 2023 estimate and an assumed 6% dividend yield. We would revisit our recommendation on AT&T if the shares were to sell off beyond a reasonable level following the separation of WarnerMedia.

ECN Capital Corp. (TSX: ECN), a diversified provider of fee-based services to financial institutions, reports two segments with three primary operating businesses: (1) Triad Financial Services (53.0% of 2022E sales and 52% of adjusted EBITDA; (2) Source One Financial Services (7% of 2022E sales and 8.5% of adjusted EBITDA); and (3) Kessler Group (40% of 2022E sales and 39.5% of adjusted EBITDA. Since its debut in 2016, ECN has been active on both the divestiture and acquisition fronts: most recently in December 2021, with the opportunistic sale of Service Finance to Truist Financial for $2 billion in cash (or ~20x 2021E operating income and a 6.5x return on its investment in less than four years) and the purchase of Source One for ~$90 million (or ~7x 2022E operating income).

More broadly, ECN has successfully transformed itself from being a primarily “on-balance-sheet” lending business to an asset-light, fee-based operating model (with a revenue base that is becoming increasingly recurring). In that context, the shares, trading at ~12x 2023E EPS, appear undervalued, particularly relative to a projected earnings CAGR of better than 50% through 2023E (as well as the longer-term growth prospects and strategic attractiveness of its core originations business).

In terms of potential transactions, we do not view Kessler Group as necessarily core to the portfolio, and we think Triad/Source One could be a longer-term takeover target, with interest from a range of potential suitors, including banks, insurance companies and/or financial sponsors, as it continues to gain scale.

Considering management commentary as well as peer/M&A valuations and reflecting a blended multiple of ~12.5x 2023E EV/EBITDA (and 15.5x 2023E EPS), value of C$7 per share, C$1 per share, and C$3.50 per share can be assigned to ECN’s Triad, Source One, and Kessler Group businesses, respectively. Accounting for corporate costs and projected net debt of ~C$3.00 per share yields a sum-of-the-parts fair value of C$8.50 per share (with bull/bear cases of ~C$9.50 and ~C$7.50 per share). (Note: The preceding per share figures have been converted from USD at an exchange rate of ~1.25x.) Risks include management execution, competition, currency/interest rate fluctuations, and access to capital, as well as funding, credit, and liquidity shortfalls at its customers and counterparties potentially associated with a prolonged domestic recession or financial crisis.

Please see the attached Hidden Opportunities Report on XPO Logistics (NYSE: XPO).

XPO Logistics, Inc. (NYSE: XPO), which completed the spin-off of GXO Logistics (NYSE: GXO) in August 2021, reports two operating segments: (1) North American Less-Than-Truckload (32% of consolidated sales and 62.5% of adjusted EBITDA in 2021), which is the third largest provider of asset-based less-than-truckload (LTL) services in North America; and (2) Brokerage & Other Services (68% of 2021 revenue and 37.5% of adjusted EBITDA), which is somewhat of a hodgepodge of businesses, including XPO’s non-asset-based truck brokerage operation along with other North American-centric service lines, such as last mile and intermodal, as well as its European transportation business, which includes both LTL and brokerage operations.

Despite the GXO transaction, we think post-spin XPO continues to have significant optionality to monetize many of its non-LTL assets, including the North American last-mile and intermodal businesses as well as its European LTL and brokerage operations; further, albeit somewhat less likely in the very near term, we think recent industry M&A activity suggests XPO’s U.S. truck brokerage operation could be an ancillary avenue for strategic alternatives. In our estimation, these potential transactions could likely be executed at accretive valuations (with relatively low tax leakage) and help unlock incremental value by hastening the company’s de-leveraging efforts (toward an investment-grade credit rating), as well as further increasing management (and investor) focus on the high-ROIC LTL business, where we see a nearing inflection point in execution/profitability, given solid underlying fundamentals.

In terms of valuation, at ~7.5x 2023E EV/EBITDA and ~12.5x 2023E EPS, we think XPO trades at an attractive discount to its most applicable LTL and brokerage peers, which trade at ~13.0x and 12.0x 2023E EBITDA and 22.0x and 16.0x 2023E EPS, respectively. (Additionally, as mentioned above, we continue to discern robust M&A interest, among both strategic and financial buyers, in several areas of the transportation market, most notably last mile and brokerage.) Based on management guidance and commentary as well as peer and M&A valuations, XPO’s LTL business could be valued at ~$87 per share, while its Brokerage & Other Services businesses could be collectively appraised at ~$48 per share. Accounting for corporate costs and projected net debt of $38 per share yields a base case sum-of-the-parts fair value of ~$97 per share (with bull/bear cases of $110 and $84 per share).

On May 6, 2021, Becton, Dickinson and Company (NYSE: BDX) announced plans to spin off its Diabetes Care business into a standalone, publicly traded company. The separation, which is subject to the customary closing conditions, including the effectiveness declaration of the Form 10 filing with the SEC, is expected to be tax-free to shareholders and to be completed on April 1, 2022. As a standalone company, the Diabetes Care business will adopt the corporate moniker Embecta Corp. and is expected to trade on the NASDAQ under the symbol “”EMBC.”” BDX shareholders of record as of March 22, 2022, will receive one share of Embecta for every five shares of BDX owned.

As to rationale, it appears that the removal of what is essentially a stagnant business, in terms of its contribution to annual revenue growth, will help management in its capital allocation decisions. With Embecta being a standalone company, management would be able to fund projects that would not meet return-rate hurdles within the larger BDX. For reference, Diabetes Care generated $1.165 billion in revenue in F2021, a 7.3% increase from the prior year. Embecta will be capitalized with $265 million in cash and $1.6 billion in debt, with $1.44 billion of the company’s debt proceeds being paid out to BDX in conjunction with the separation.

BDX is currently operating under what it refers to as the “”BD 2025″” plan, which rests on three pillars: Grow, Simplify, and Empower. Across the three pillars of BD 2025, which was introduced in 2021, the company is looking to strengthen BDX’s growth profile, reshape its innovation pipeline, reduce complexities, manage its portfolio with an eye to increasing margins to above pre-pandemic levels, and prudently deploy capital balancing for returns to shareholders, internal investments, and targeted M&A.

In the context of the company’s current portfolio and future growth opportunities, revenue is segmented into two buckets: Durable Core, and Transformative Solutions. Durable Core refers to existing established products that the company sells, which total about $14 billion of its current sales portfolio. Transformative Solutions refers more to smart connected-care products, products being sold into new care settings (i.e., outside of traditional channels such as hospitals only), and products for improving chronic disease outcomes; it currently accounts for approximately $4 billion in annual sales (excluding COVID-19 testing).

The spin-off of Embecta fits into BD 2025 as it will allow the parent company increased financial flexibility while improving the company’s top line growth profile. While it can be noted that Embecta’s margin profile exceeds that of BDX post-spin, management targets post-spin BDX margin expansion of 400 basis points and top-line growth in excess of 5.5% is achievable as Transformative Solutions growth rates should exceed that of the Durable Core portfolio while exhibiting wider margins.

On a pre-spin basis, we fairly value shares of BDX at $282 per share, consisting of $266 in value from the post-spin parent company and $16 per share in value attributable to the spin company. On a post-spin basis, shares of Embecta are fairly valued at $82 per share, which incorporates the one-for-five share distribution ratio (see Exhibit 19), Given minimal upside to our target price and the limited time remaining before completion of the transaction (April 1), we rate shares of BDX at NEUTRAL. We suggest waiting for post-spin pricing to potentially present an attractive entry point on either side before making an investment.

On February 24, 2021, Exelon Corp. (NASDAQ: EXC) announced that its Board of Directors had approved a plan to spin off the company’s competitive power generation and customer-facing energy businesses into a standalone, publicly traded company. The new company will adopt the corporate moniker Constellation Energy Corp. Following the transaction, the parent company will retain control of the company’s fully regulated electric and gas utilities, with over 10 million customers spread over five states.

The separation, if consummated, is expected to be completed via a tax-free distribution of shares in Exelon Generation to EXC shareholders, and is subject to standard requirements, including final Board approval, an effectiveness declaration of the company’s Form 10 filing by the SEC, and regulatory approvals, among others. EXC is currently targeting completion of the spin-off on February 1, 2022, and expects Constellation to trade on the NASDAQ under the symbol, “”CEG.””

The separation announcement followed a November 3, 2020, announcement that Exelon had retained advisors to assist with a strategic review of its corporate structure aimed at determining the best potential avenues to create value and position its businesses for success, including the separation of Exelon Generation and Exelon Utilities. For context, this development came following reports in the business press that the company had seemingly come under pressure from activist investor Corvex Management, which currently holds 1.8 million shares, but previously owned 3.8 million shares, or about a 0.4% position (albeit filed under a 13F).

Investors tend to value the consistent earnings streams provided by pure-play utility companies more highly than the more volatile results of unregulated power concerns (as well as those of hybrid/more integrated models), particularly in the wake of historical transactions at the time that were aimed at improving corporate focus on regulated assets. These transactions included NiSource’s (NYSE: NI) spin-off of its pipeline assets and PPL Corp.’s (NYSE: PPL) spin-off of its unregulated power plants, as well as the sale of unregulated power assets by both Duke Energy (NYSE: DUK) and Ameren Corp. (NYSE: AEE) to Dynegy Inc. (formerly NYSE: DYN). Previously, Exelon management had indicated a preference for its integrated approach, stressing the quality of its assets and the balance sheet/cost-of-capital advantages it created, although the stock’s persistent underperformance may have left the company open to criticism from outside investors.

On a pre-spin sum-of-the-parts basis, we fairly value shares of EXC at $59 per share, consisting of $16 in value from the Constellation business and $43 per share in value derived from the remaining T&D business. On a post-spin basis, we fairly value shares of CEG at $49 per share, accounting for the one-for-three share distribution ratio, and EXC at $43 per share (see Exhibit 16). We rate pre-spin shares of EXC at NEUTRAL, as, limited upside to our fair value combined with caution regarding the yields represented by our fair value estimates in the current inflationary environment and considering the high likelihood of interest rate hikes in 2022, which raises concern especially in light of EXC’s share price performance over the past 12 months.

Please see the attached Hidden Opportunities Report on PAR Technology Corp. (NYSE: PAR). 

“PAR Technology Corp. (NYSE: PAR) operates two distinct business segments: (1) Restaurant/Retail (~67% of consolidated sales in 2020), which provides point of sale (POS) systems as well as a broad suite of software solutions and other services to the restaurant and, to a lesser degree, the retail sector; and (2) Government (~33% of 2020 revenue), which provides intelligence solutions and mission systems contract support, primarily to the U.S. Department of Defense (DoD) as well as to other domestic/allied federal agencies.  Following the receipt by PAR’s Government segment of a large multi-year contract from the U.S Air Force in November 2021, we think the company has increased flexibility to explore the separation or sale of this non-core business, which, in our view, would both provide incremental growth capital for and allow investors to focus on its faster-growth/higher-margin (and increasingly recurring) Restaurant/Retail business. To that end, we would note that PAR’s core Restaurant/Retail segment has itself undergone, largely by acquisition, what we view as an underappreciated transition from being primarily a provider of POS systems hardware to being an end-to-end provider of integrated software solutions, including front-of-house and back-office/operations software, drive-through technology, loyalty program management, and payment services (or what management terms a unified commerce platform). In that context, at less than 3.5x 2024E EV/sales, the stock trades near a 52-week low and a stark discount to software peers, which trade at ~6.5x 2024E EV/sales. (By our calculation, this discount widens further when looking at EV/ARR multiples.) Based on management commentary as well as peer and M&A valuations, value of $69 per share and $3 per share can be assigned to PAR’s Restaurant/Retail and Government businesses, respectively. Accounting for projected net debt of ~$4 per share yields a base case sum-of-the-parts fair value of ~$68 per share (with bull and bear cases of $81 and $55.50, respectively). Potential catalysts include a spin-off or sale of assets, better than expected growth/margins, and/or acquisitions. Potential risks include management execution, acquisition integration, competition, customer concentration, equity dilution, regulation, cyberattacks and/or economic disruptions.” – The Hidden Opportunities Report

On September 3, 2019, CNH Industrial N.V. (NYSE: CNHI, CNHI IM) announced plans to spin off its “on-highway” (Commercial Vehicles and Powertrain segments) as a separate, publicly listed company. The separation of “on-highway” from “off-highway” assets (agriculture, construction, and specialty segments) was announced as part of the company’s five-year2020-2024 business plan, a strategic reorganization designed to improve operating performance. The separation, which is expected to be tax-free to shareholders, is anticipated to be completed on January 3, 2022, subject to approval at an Extraordinary General Meeting of shareholders that is scheduled to be held on December 23, 2021. Iveco Group will be listed solely on the Borsa Italiana, with no associated ADR trading on the NYSE (unlike CNHI currently), and will trade under the symbol “IVG.” CNHI shareholders will receive one share of Iveco Group for every five shares of CNH Industrial held.

The separation of the lower-margin on-highway business from the company’s considerably more profitable Agriculture division (which generates approximately 3x the operating profit margins) has been under consideration since early 2018, when the idea was proposed by former CEO Richard Tobin. It appears that the separation will allow focused management teams to better tailor business strategies for the needs of the standalone post-spin companies, better adapting them for customers with divergent requirements, end-market dynamics, and strategic starting points. It should be noted that there are currently limited synergies between the on- and off-highway businesses, aside from the engines manufactured by the Powertrain segment. Post-spin, the companies will enter into long-term supply agreements for which Iveco will supply internal combustion engines to post-spin CNHI. Notably, Exor, controller of CNHI, has committed to remaining a shareholder in both post-spin companies.

On a pre-spin basis, we fairly value shares of CNHI at $18 per share (EUR 16 per share), consisting of $6 in value from Iveco, including its ownership position in Nikola Corp. (NASDAQ: NKLA), and $12 in value from post-spin CNHI. For European holders, we fairly value shares of CNHI at EUR 16 per share, consisting of EUR 5 per share in value from Iveco and EUR 11 per share in value from post-spin CNHI. Given limited upside to our fair value estimate from the current share price, we rate pre-spin shares of CNHI at NEUTRAL. Following the spin-off, we would view the parent company as more attractive, given its more favorable margin profile and secular growth opportunities versus what we view as a challenging environment for achieving sustained profitability improvements at Iveco.

We note that the spin company only trading on the Italian exchange presents an opportunity, as investors limited to ownership positions in domestic stocks may be forced to sell the distribution indiscriminately, with likely somewhat limited demand to offset selling pressure. If U.S.-based investors are forced to sell, shares of Iveco could be temporarily depressed to levels that present an attractive risk/reward scenario for new investors.

On September 3, 2019, CNH Industrial N.V. (NYSE: CNHI) announced plans to spin off its “”on-highway”” (Commercial Vehicles and Powertrain segments) as a separate, publicly listed company. The separation of “”on-highway”” from “”off-highway”” assets (agriculture, construction, and specialty segments) was announced as part of the company’s five-year2020-2024 business plan, a strategic reorganization designed to improve operating performance. The separation, which is expected to be tax-free to shareholders, is anticipated to be completed on January 3, 2022, subject to approval at an Extraordinary General Meeting of shareholders that is scheduled to be held on December 23, 2021. Iveco Group will be listed solely on the Borsa Italiana, with no associated ADR trading on the NYSE (unlike CNHI currently), and will trade under the symbol “”IVG.”” CNHI shareholders will receive one share of Iveco Group for every five shares of CNH Industrial held.

The separation of the lower-margin on-highway business from the company’s considerably more profitable Agriculture division (which generates approximately 3x the operating profit margins) has been under consideration since early 2018, when the idea was proposed by former CEO Richard Tobin. It appears that the separation will allow focused management teams to better tailor business strategies for the needs of the standalone post-spin companies, better adapting them for customers with divergent requirements, end-market dynamics, and strategic starting points. It should be noted that there are currently limited synergies between the on- and off-highway businesses, aside from the engines manufactured by the Powertrain segment. Post-spin, the companies will enter into long-term supply agreements for which Iveco will supply internal combustion engines to post-spin CNHI. Notably, Exor, controller of CNHI, has committed to remaining a shareholder in both post-spin companies.

On a pre-spin basis, we fairly value shares of CNHI at $18 per share (EUR 16 per share), consisting of $6 in value from Iveco, including its ownership position in Nikola Corp. (NASDAQ: NKLA), and $12 in value from post-spin CNHI. For European holders, we fairly value shares of CNHI at EUR 16 per share, consisting of EUR 5 per share in value from Iveco and EUR 11 per share in value from post-spin CNHI. Given limited upside to our fair value estimate from the current share price, we rate pre-spin shares of CNHI at NEUTRAL. Following the spin-off, we would view the parent company as more attractive, given its more favorable margin profile and secular growth opportunities versus what we view as a challenging environment for achieving sustained profitability improvements at Iveco.

We note that the spin company only trading on the Italian exchange presents an opportunity, as investors limited to ownership positions in domestic stocks may be forced to sell the distribution indiscriminately, with likely somewhat limited demand to offset selling pressure. If U.S.-based investors are forced to sell, shares of Iveco could be temporarily depressed to levels that present an attractive risk/reward scenario for new investors.