Smith & Wesson announced that they will be spinning off American Outdoor Brands in August. The small size (nearly micro-cap) of the spin-co relative to the parent may present an opportunity to take advantage of forced selling. Incentives of new management are strong. Trading comps suggest that the spin-co may fetch a higher multiple than it would as a part of Smith & Wesson Brands. It was announced Friday that Smith & Wesson’s (SWBI) Board of Directors approved the spinoff of their “Outdoor Products and Accessories” business line as American Outdoor Brands, which generates just under $170M in annual sales and is the product of a series of acquisitions. The segment is described as “a leading provider of outdoor products and accessories encompassing hunting, fishing, camping, shooting, and personal security and defense products for rugged outdoor enthusiasts.” Spinoffs such as this one, especially given the relatively small size of the child company, often create opportunities for enterprising investors through mispricings of both the parent and child. The distribution of American Outdoor Brands (AOUT) stock will be completed on August 24th, and the new stock should then begin trading. The parent company of the American Outdoor Brands spinoff will remain trading with the ticker SWBI, and be a pure-play firearms business. I believe focusing in on a core business line and spinning off non-core business is a great move and demonstrates good business sense and shareholder focus of management, regardless of one’s beliefs regarding the firearms industry. While I find the child of this spinoff much more interesting, I’ll provide some trading comps on the parent as well since often both the parent and the child do well after a spinoff for a variety of reasons. Joel Greenblatt discusses this at length in “You Can Be a Stock Market Genius.”  [full article]