Stock of Masimo soars following announcement of planned separation of consumer division

Masimo, a medical devices company based in Irvine, California, saw its shares surge by 13% in extended trading on Friday following the announcement of its plan to spin off its consumer unit. This strategic decision aims to enhance the profitability of its primary healthcare Business.

The separation is expected to involve Masimo’s consumer audio and consumer Health products, such as the Stork baby monitor and the Freedom smartwatch, while the company will retain its professional healthcare and telehealth products. CEO Joe Kiani is anticipated to continue leading Masimo and assume the role of chairman in the newly formed entity.

In 2022, Masimo acquired audio products maker Sound United LLC for $1 billion to expand its portfolio of healthcare products. However, the stock experienced a 37% decline post-acquisition as investors questioned the compatibility of the non-healthcare purchase. Activist investor Politan Capital Management subsequently acquired a 9% stake in the company, calling for potential changes within the management and board.

Despite the initial skepticism, Masimo reaffirmed its guidance for the first quarter and fiscal year 2024. The company aims to complete the spinoff in a timely manner after completing due diligence and securing regulatory approval.

CEO Joe Kiani expressed his optimism regarding the separation, stating, “This approach is expected to maximize shareholder value and provide both Masimo healthcare and the new consumer business with the best path for success.”

Masimo’s share price has shown positive momentum, with technical indicators suggesting a continuation of the current uptrend. Investors are advised to monitor the $197 level, which may present a significant resistance level based on historical price action.

In afterhours trading on Friday, Masimo shares experienced a 13.4% increase, reaching $153.00.

Disclaimer: The views and opinions expressed in this article are for informational purposes only. Readers are advised to conduct their own research before making any investment decisions.

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