“Breaking up” is the latest trend for large corporations. This trend is not isolated in one single industry; companies such as Johnson & Johnson, GE, Toshiba, and many others have all decided to split up into two smaller companies. This trend began in 2021, has continued through 2022, and is likely to continue to expand for some time to come.
One driving force behind this trend is the fluctuations in the markets. Between the COVID-19 pandemic, war, shortages, and much more, the markets have experienced quite a bit of rapid growth and decline over the last 2 years. By breaking a large corporation down into smaller companies, companies have a newfound sense of flexibility and quick response times.
Additionally, competition within industries only continues to grow as operational efficiencies, technology, and innovation expand. Companies are under quite a lot of pressure to perform well and maintain or exceed investor expectations. Sometimes to grow bigger, you first have to build something smaller, which is exactly what IBM is doing with their new company, Kyndryl. Also, sometimes splitting up a company can help reverse decisions that investors were not pleased with.
Another trend that companies like Alphabet Inc. are hopping on is stock splitting. When a company splits its stock, each share is divided into multiple shares. This helps increase the number of available shares, but it lowers the value of each share. This can help improve the ease of trading shares and make the shares appear more affordable. When stock is split, it does not decrease the overall value of the company, but rather only changes the individual price of each share.
As our economy and markets continue to behave in non-traditional ways due to the unique global events occurring, we can expect to see more unique movements from companies and corporations in an effort to combat the rapidly changing markets.