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Here’s Why the Glaxo Share Price Could Skyrocket in 2022; a Spinoff of Its Businesses

Simon Mugo trader
Updated 6 Jan 2022
  • Glaxo shares ended 2021 up 19.4%, and many are expecting better performance this year.
  • The company will split into two listed firms separating its consumer healthcare business and its pharmaceuticals business.
  • Investors could be rewarded with significant gains following the demerger.

The GlaxoSmithKline plc (LON: GSK) share price ended last year up 19.4%, outdoing the FTSE All-Share Index, which registered a 15.2% increase, and many are expecting better performance from the healthcare and pharmaceuticals company this year.

Well, investors stand to benefit from the pending split of Glaxo’s consumer healthcare division from its vaccines and pharmaceuticals business, which has more significant growth potential compared to consumer healthcare.

Glaxo intends to pass on most of its debt obligations to the consumer healthcare business. At the same time, the pharmaceutical company will require significant reinvestments as it develops new drugs that could generate significant revenues in future.

However, investors will have to contend with lower dividends from Glaxo due to the reinvested amounts and the debt payments being made by the consumer business.

The global pharmaceuticals company has been embroiled in a tussle with activist investor Elliott Management Corp, which Paul Singer owns, about its future direction with Singer pushing for a sale of the consumer healthcare business instead of a spin-off.

However, it appears that Glaxo’s board will have the final say on the matter as they have the support of other investors who are backing the spin-off, which should be completed later this year.

Investors in Glaxo shares will benefit from the spin-off since they will own shares in the two companies after the spin-off and could see the value of their investments skyrocket after the demerger.

The pharmaceutical business is expected to register more growth than the consumer business and may attract investors who might push its shares higher.

Meanwhile, the consumer business is expected to register less growth but could be a stable dividend payer and attract investors interested in its solid business and dividend payments. Such investors may be willing to pay more for the shares, increasing prices.

All in all, we are looking forward to an eventful year for Glaxo shares, but only time will tell whether investors will get the much-needed rally.

*This is not investment advice. Always do your due diligence before making investment decisions.

Glaxo share price.

IG chart of GlaxoSmithkline share price 06-01-2021
Source: IG

The Glaxo share price ended last year up 19.4%, outperforming the FTSE All-Share Index, which was up 15.2%.

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Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading