Cypress Drawing Power from the Sun (SPWR, CY)

A long-awaited move is finally happening.  SunPower Corporation (NASDAQ:SPWR) has registered more than 42 million shares of Class B common stock owned by Cypress Semiconductor (NYSE:CY) to be distributed in a spin-off to stockholders. Cypress expects to distribute about 0.27 shares of the Class B stock for every share of common stock outstanding. Cypress structured the spin-off as a dividend and a tax-free transaction for shareholders.

The Class B stock will trade on NASDAQ as ‘SPWRB,’ and the Class A common stock will trade as ‘SPWRA’ once the spin-off is completed.The current symbol, SPWR, will disappear. In trading so far today,SunPower’s stock has gotten a boost of more than 6%, while Cypress isup about 1%.

The spin-off was announced on September 5th and Cypress share price hasfallen about 15% since then. SunPower’s share price has fallen about12%, not counting today’s gain. We have also provided a chart from BigCharts.com showing the performance of the two companies.  This move has beenanticipated for more than one year.  It looks like thecompanies should have made this separation long ago.

Oddly enough, in the press release announcing the deal, Cypress statedthat the spin-off unlocked the value of the semiconductor business forthe “management team.” Cypress gets no cash in the deal, and freeingitself from SunPower won’t boost its valuation. The management team,though, probably gets a nice payday in the form of the new SunPowershares.

Paul Ausick
September 18, 2008