An Earnest Poser: Was Excessive Optimism At Work, In Pricing The Organon Spinoff? Seems Likely...

Technically speaking, Merck and its advisors only really set the ratio of the number of new shares of Organon, to be issued for each pre-existing Merck share. But that ratio has the effect of selecting the initial public price at which Organon begins trading. And to be sure, as we mentioned, it rose nearly five per cent on that first day.

However, every day since, it has declined. And to be sure, while these businesses under the new/old legacy name are cash cows, they are among the older/oldest ones in the former Merck stable. [With a throwback masthead, to boot. . . .]

With the Dow in record territory, it is easy to see how the advisors (and Carrie Cox, to be clear) might have lobbied hard for a very high valuation -- or, a very low ratio of new Organon shares, to each of the existing $80-some per share Merck NYSE prevailing prices. So -- it has swooned from around $40 to $37, to under $29. . . as I type this. Not really the best look, for bringing out what is supposed to be a solidly defensive, non-cyclical stock. A bit, from a trading rag, overnight:

. . .Wall Street appears to be divided on the prospects of Organon with the company earning two bullish ratings, two neutral ratings, and a sell rating. The average price target of $40.00 per share implies an upside of ~27.3% to the last close. . . .

That one bullish rating has skewed the average. To my eye, Organon looks -- fairly valued -- like a sub-$25 per share stock. Onward, grinning. . . ever grinning. Whadda-ya' know, two in a row -- in the old power alley!

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