Last Thursday, one of the biggest names in American agriculture lost 84% of its stock price in a single session.
Trading volume ran at roughly ten times normal. Data sites flashed record lows. A stock that sat near $77 the day before changed hands around $12.
If you only looked at the chart, you would have assumed something terrible happened. Fraud, a failed trial, a lost customer.
Nothing like that happened. The company split in two.
Here is the part that makes the chart misleading. Every shareholder received one share of a brand-new company for each share they already owned. On the first day of trading, the old stock was worth about $12.56 and the new one about $67.46. Add them together and you get roughly $80, against a $77.65 close the day before. The value didn’t vanish. It moved into a second ticker.
That is the mechanical part, and it is not the interesting part. The interesting part is what happens to the stock that is left, because a spin-off creates a very specific kind of mispricing.
The new company is the shiny one. It got the famous brands, the growth story and a seat in the S&P 500, which forces index funds to buy it. The leftover company gets the opposite: it is bumped out of the S&P 500 into the smaller mid-cap index, so funds built around the S&P 500 have to sell. It also inherits the boring, hard-to-model, controversial parts of the old business. Holders who got it by accident often don’t want it and sell it for reasons that have nothing to do with its earnings.
So the question isn’t “why did it fall 84%?” That one has a boring answer. The question is: what is the leftover business actually worth, and what is the market so worried about that it is willing to hand it over at this price?
The worry has a name, and it arrived the same week. This past week, sixteen states and territories sued the company and its spun-off sibling in Indiana state court. Their claim is blunt. They allege the split was a way to move roughly $40 billion of valuable assets into the new company, leaving the old one holding long-term environmental liabilities tied to PFAS, the so-called forever chemicals. The company calls the suit “entirely without merit.”
Hold that thought, because the business on the other side of that lawsuit is more interesting than the headlines suggest. It is a global crop-protection company with about $7.8 billion in sales, a net cash balance sheet and a stock price that implies it is worth roughly five times its annual operating profit.
So which company is it, and is the discount the market is demanding too big, too small or about right?
